Lesson 7: Holder in Due Course and Bank Transactions

If an individual takes an instrument believing it was intended as an honest transaction, then he or she will qualify as a holder in due course based on which of the following requirements?

• in good faith

• without notice of defect

• no evidence of irregularity

• for value

Under the Uniform Commercial Code (UCC), value has not been given if the holder

• gives an irrevocable obligation as payment.

• gives a non-negotiable instrument.

• performs the agreed-upon promise.

• acquires a security interest.

A ____________ is a written promise by one party to pay money to another party.

• check

• promissory note

• draft

• certificate of deposit

Which article of the UCC establishes the requirements for negotiable instruments?

• Article 3

• Article 3A

• Article 4

• Article 4A

Which article of the UCC establishes the regulations and principles that control procedures for checking account deposits and collections?

• Article 3

• Article 3A

• Article 4

• Article 4A

Barbara needs to bring in a check to hold her spot on the class field trip to Washington D.C. Barbara’s mother does not get paid until the end of the month, but told Barbara she can write a check and date it for the 31st. Which of the following types of checks did Barbara’s mom write to hold her spot on the field trip?

• predated check

• certified check

• stale check

• postdated check

which of the following statements would render an instrument not payable at a certain time?

• payable on June 4, 2011

• payable on or before June 4, 1970

• payable 30 days after June 4, 2011

• payable after June 4, 2011

Peter calls his friend Lily to borrow $500. On the side of a box, Peter writes and signs a note stating he will pay back the $500 as long as Lily allows him to use her car until he gets a job. The instrument is not negotiable because it violates which of the following?

• permanency

• no requirement except the payment of money

• payable to order or bearer

• portability

Breach of contract, fraud, illegality of a contract, and the discharge of an instrument by cancellation are all examples of

• taking without notice of defect.

• no evidence of forgery.

• immunity from personal defenses.

• personal defenses.

Helen Harrison creates an instrument containing the words “pay Jose Sanchez” and her signature. This is a _____________ endorsement and creates __________ paper.

• qualified, order

• special; bearer

• special; order

• blank; bearer