1. Carrie owed Charlotte $20,000. Carrie offered Charlotte a promissory note (a negotiable instrument) worth $200,000 upon maturity, which occurred in six months, as payment for the debt. Carrie had actually stolen the promissory note from her friend Samantha. Charlotte probably won't qualify as a holder in due course because 

A. Charlotte didn't give value for the instrument. 

B. Charlotte didn't take the instrument in good faith. 

C. Charlotte should have known the instrument was stolen. 

D. the instrument was stolen from Samantha. 

 

2. Ella owed Mark $500. Since Ella didn't have the money to pay Mark, she asked Mark if he would accept a negotiable instrument, such as a promissory note, as payment for the debt. Mark indicated he would accept a negotiable instrument as payment. Ella wrote out a promissory note in which she agreed to pay Mark $550 in 60 days if she failed to pay him the $500 in cash within the next 30 days. Ella's promissory note isn't negotiable because negotiable instrument must 

A. be payable at a definite time. 

B. state a fixed amount of money. 

C. be payable to order or to bearer. 

D. give an unconditional promise or order to pay. 

 

3. Don purchased a boat from Randy. Randy told Don that he owned the boat free and clear of all liens, which Randy knew to be false, because he had just put the boat up as collateral on a loan at the bank two weeks earlier. Don issued Randy a negotiable promissory note for $5,000 to pay for the boat. By the time the promissory note came due, the bank had repossessed the boat, making Don aware of Randy's deception. Don will be able to avoid payment to Randy because there was 

A. a failure of consideration. 

B. a breach of contract. 

C. some sort of illegality.

D. fraud in the inducement 

 

4. Joey makes a deposit at Hometown Bank in the amount of $500. Joey's deposit consist of a 4500 check written to him by Ross, who banks with Crosstown Bank. Hometown Bank deposits the check with Friend's Bank, which in turn sends the check to Crosstown Bank. Which of the following is true about this set of facts? 

A. Hometown Bank is the payor bank. 

B. Crosstown Bank is the payor bank. 

C. Hometown Bank is an intermediary bank. 

D. Crosstown Bank is the depository bank. 

 

    • 10 years ago
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