1. If a bank wrongfully pays an item, the bank may be subrogated to the rights that any holder in due course of the item may have against the drawer of the item

- True

- False

2. A post dated check is considered a properly payable check and a bank can pay the item

- True

- False

3. A check that is six months old is no longer properly payable

- True

- False

4. Wally corp borrows 400k from bank. Wally corp executes a negotiable promissory note to evidence the loan. Bank insists that two corp. officers also be personally liable on the debt. So ally, the ceo, signs his name on the back of the note, and Charlene, the cfo, executes a separate unconditional guaranty. The loan proceeds are used solely for corporate purposes. Which is true?

- Both ally and Charlene are accommodation parties

- Only Charlene is an accommodation party

- Only ally is an accommodation party

- Neither ally nor Charlene are accommodation parties

5. Keith was an accommodation party on a note co-signed by his son, hallow, in connection with hallow’s purchase of a car from dealer. If the dealer sues keith as co-maker, which of the following responses by keith should cause the dealer the most concern?

- “I don’t owe you a penny because you tampered with the odometer on the car”

- “forget about collecting from me, since hallow had his debt discharged in his recent bankrupty proceedings”

- “I didn’t receive any consideration from you or hallow for my signature, so I am not liable on the note”

- “hallow and I had a private understanding that I would not have to pay”

6. Assume that the dealer has taken action that results in a partial discharge of keith’s liability. The dealer then negotiated the note to finance company. Finance company then demanded payment from keith. Which statement is correct?

- Keith’s partial discharge is not effective against the finance company.

- Keith’s partial discharge is effective against the finance company, whether or not the finance company is a holder in due course

- Keith’s partial discharge is not effective against the finance company if the finance company is a holder in due course

- Keith’s partial discharge is not effective against the finance company if the finance company is a holder in due course and did not have notice of the discharge when it acquired that status

- None of the above

7. Eagle property hired falcon contractor to install a small ice rink in one of its buildings. Falcon hired gull engineering as a subcontractor to perform some of the work. After the rink was complete, eagle issues a 50k check to falcon. The check was payable to the order of “falcon contractor and gull engineering.” Falcon obtained payment from the drawee bank without obtaining gull’s indorsement. How much may the drawee bank charge eagle’s account for the check?

- 50k

- 25k

- $0

- the amount that eagle promised to pay falcon, minus the amount falcon promised to pay gulf

8. According to article 4 of the ucc, “bank” means a financial institution engaged in the business of banking, including a savings bank, savings and loan association, credit union, or trust company.

- True

- False

9. Regarding “persons entitled to enforce an instrument” (pete), a person could be a PETE even though the person is not the owner of the instrument or is in wrongful possession of the instrument.

- True

- False

10. According to article 4 of the ucc, a “presenting bank” means a bank presenting an item except a depository bank.

- True

- False

11. In a surety arrangement, which of the following contracts are involved?

- The agreement of the underlying obligation between the principal and the creditor

- The agreement of the surety to support the underlying obligation

- The agreement by the principal to reimburse the co-signer

- A & C only

- All of the above

12. Even if the indorser did not intend it, when an indorser signs a negotiable instrument, the indorser becomes a surety for the parties who signed the instrument before the indorser.

- True

- False

13. “issuer” is the name given to a drawer, maker or acceptor of a negotiable instrument.

- True

- False

14. Prince wanted to purchase a yacht for 1M, however, the yacht company, Kimberly exotic yachts, required prince to secure a surety for 500k promissory note to secure a loan to purchase the yacht. Prince’s biggest fan, duhart, happily decided to co-sign the note. The note had a due date of January 1, 2017. The note also had a provision in it where duhart consented to any changes made or could be made between prince and Kimberly exotic yachts of the note. On june 2, 2016, prince realized he would not be able to make payments on the note, and would default on the jan 1, 2017 due date. Without informing duhart and without getting her consent, prince contacted Kimberly exotic yachts and re-negotiated the note, and extended the due date to January 1, 2018. Which of the following statements is true?

- The initial note is not negotiable because it is not unconditional

- The re-negotiated note no longer binds duhart as a surety because she was unaware and did not give consent to the modification of the original note

- The re-negotiated note is valid and binds duhart as a surety

- None of the above

15. A maker’s liability on a note is considered to be primary

- True

- False

16. A drawer’s liability on a draft is considered primary.

- True

- False

17. Elsa indorsed a note without carefully reading the fine prints in the note which had the following provision “all parties to this note hereby waive all rights with respect to presentment and notice of dishonor.” Which of the following statements is true?

- The note is not negotiable

- The note is negotiable

- Elsa is entitled to notice of dishonor of the note

- A & C only

- None of the above

18. If a drawee bank accepts a draft, it has certified the draft.

- True

- False

19. The president of nova corp was nova smith. Nova smith is authorized to sign notes on behalf of nova corp.. However, given his busy schedule, nova smith, without careful review, signed several promissory notes on behalf of nova corporation. He signed two notes. Note 1: signed only as “nova smith” and Note 2: signed as Nova corp., “nova smith.” Which of the following is true?

- Nova smith is personally liable on note 1 to a holder in due course

- Nova corp is liable on note 1 to a holder in due course

- Nova smith is not liable as an agent in note 1 to a holder in due course

- Both B & C are correct

- Both A & B are correct

20. Regarding nova corp’s and nova smith’s liability as to note 2, which of the is/are correct?

- Under the ucc, parol evidence may not be admitted to determine whether nova smith was authorized to sign on behalf of nova corp.

- Under the ucc, parol evidence may not be admitted to determine whether nova smith intended to sign on behalf of nova corp

- Nova smith is liable as an agent to a holder in due course

- All of the above

- None of the above