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| 1 | |
When a person signs a negotiable instrument, he or she is potentially liable for the instrument. This type of liability is called __________ liability. |
| | A) | Contract |
| | B) | Executory |
| | C) | Signature |
| | D) | Testamentary |
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| 2 | |
A party may be liable if the transfer of a negotiable instrument breaches a warranty associated with the instrument. This type of liability is called __________ liability. |
| | A) | Contract |
| | B) | Executory |
| | C) | Warranty |
| | D) | Signature |
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| 3 | |
A party who is _________ liable for an instrument must pay the stated amount on the instrument when it is presented for payment. |
| | A) | Contractually |
| | B) | Strictly |
| | C) | Conditionally |
| | D) | Primarily |
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| 4 | |
When a holder presents an instrument within a timely and proper manner, but acceptance or payment is refused, the instrument has been __________. |
| | A) | Denied |
| | B) | Rejected |
| | C) | Dishonored |
| | D) | None of the above |
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| 5 | |
A(n) __________ is a party who signs an instrument to provide credit for another party who has also signed the instrument. |
| | A) | Maker |
| | B) | Drawer |
| | C) | Accommodation party |
| | D) | Acclimating party |
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| 6 | |
A(n) __________ is a party who has authority to act on behalf of and bind another party, the __________. |
| | A) | Drawer, drawee |
| | B) | Drawee, drawer |
| | C) | Agent, principal |
| | D) | Principal, agent |
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| 7 | |
If the principal decides to __________ the unauthorized agent's signature, the principal will then become liable for the instrument, while the agent will escape personal liability. |
| | A) | Ratify |
| | B) | Certify |
| | C) | Deny |
| | D) | Apply |
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| 8 | |
When a party transfers an instrument for consideration, he/she warrants: |
| | A) | The transferor is not entitled to enforce the negotiable instrument |
| | B) | Signatures on the instrument are authentic and unauthorized |
| | C) | The instrument has not been altered |
| | D) | The instrument is subject to a defense or claim in recoupment |
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| 9 | |
When a party presents an unaccepted draft to a drawee, the holder guarantees: |
| | A) | The warrantor of the instrument is not entitled to enforce the instrument |
| | B) | The instrument has been altered |
| | C) | The warrantor has no knowledge that the drawer's signature or the draft is unauthorized |
| | D) | All of the above |
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| 10 | |
Which of the following is not a real defense? |
| | A) | Infancy |
| | B) | Duress |
| | C) | Fraud in the inducement |
| | D) | Fraud in the factum |
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