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Exam 22: Negotiable Instruments

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Question 31

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For a negotiable instrument to operate practically as a substitute for cash, it must be easily transferable and uncollectible.

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Question 32

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The lack or failure of consideration is a personal defense and can be used to avoid payment to an ordinary holder, an HDC, and a holder through an HDC.

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Question 33

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Kelly signs an instrument in favor of Leo that states it is "subject to a certain agreement between Kelly and Mona." This instrument is

LNG LLC and Mainline Utility Corporation enter a contract for a sale of liquefied natural gas. LNG draws a draft unconditionally ordering Mainline to pay $50,000 to LNG's order in sixty days. Mainline signs and dates the draft. LNG can sell the draft to

Brie signs an instrument in which she promises to pay Carmen a certain price for her Dodge Dart. The instrument will be negotiable if it meets all of the requirements for negotiability, including that it is payable in

Vera gives Will a $500 check as payment for a debt. Will crudely increases the amount of the check to $5,000 and deposits the check in his First Bank account. Vera is liable for the payment of $5,000 to

On behalf of Bubbly Drinks Company, Calvin signs an instrument in which he promises to deliver 100 cases of soda as payment to Dispatch & Delivery, Inc., on April 1. This instrument is

Every party who signs a negotiable instrument is primarily liable for payment of that instrument when it comes due.

When a note is lost, impaired, or destroyed, the owner loses the right to be paid its value, even if its existence can be proved with a copy.

Warranty liability arises in the negotiation of an instrument even when the transferor does not sign it.

Karen writes on a piece of paper, "I owe you $600," signs it, and gives it to Lou. This instrument is

Rick negotiates a bearer instrument to Shane by delivery

At 1 A.M., in front of EZ Credit Corporation, which is closed, Frank buys a $500 promissory note for $50 from Greg. When presented with Frank's demand for payment, Diane, the maker of the note, could successfully claim that Frank

Coki receives a payroll check from Data Solutions Inc. and indorses it by signing her name on the back of the check. This is

If a check is made "payable to the order of Marcus or Nathan," both parties' indorsements are necessary for negotiation.

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is

Opal signs a promissory note payable to the order of Payday Loan Company. The note states that it is payable "with interest at the legal rate." This note is

To avoid the risk of loss from theft, a holder can convert a blank indorsement to a special indorsement by writing, above the signature of the indorser, the name of the indorsee.

Mortgage notes tied to a variable rate of interest-fluctuating in response to market conditions-are not negotiable.

A person who transfers an instrument for consideration warrants to all subsequent transferees and holders who take the instrument in good faith that all signatures on the item are authentic and authorized.