Question 1 A check is a promise to pay a sum of money at some time in the future.

• True
• False

Question 2A negotiable instrument can be transferred by only negotiation.

• True
• False

Question 3Diner's Restaurant issues an instrument in favor of General Supplies, Inc. For the instrument to be negotiable, it need not:

a.be an unconditional promise or order to pay.

b.be payable on demand or at a specific time.

c.be signed by Diner's Restaurant.

d.recite the consideration given in exchange for a promise to pay.

Question 4 City Investment Company signs a check payable to Downtown Lenders, Inc., to buy a promissory note executed by Eagle Corporation. This check:

a.does not constitute sufficient consideration for HDC status.

b.does not satisfy the value requirement for HDC status.

c.satisfies the consideration requirement for HDC status.

d.satisfies the value requirement for HDC status.

Question 5Good faith is "honesty in fact and the observance of reasonable commercial standards of fair dealing."

• True
• False

Question 6In good faith and for value, Carol receives from Dick a negotiable bearer instrument. Carol does not know that Dick stole the instrument. Carol is:

a.an HDC, because the good faith requirement applies only to the holder, not the transferor.

b.not an HDC, because the instrument is a bearer instrument.

c.not an HDC, because Dick did not acquire the instrument for value.

d.not an HDC, because Dick did not acquire the instrument in good faith.

Question 7If a stop-payment order on a check is not renewed, the bank can pay the check, as a stale check, without liability.

• True
• False

Question 8North Bank issues a cashier's check for its customer Ocean Shipping, Inc. Pier Harbor Company presents the check for payment. North Bank must

a.honor the check.

b.refuse to honor the check.

c.stop payment on the check.

d.take possession of the check and recredit its customer's account.

Question 9Sue receives a check from Temp Persons, Inc. (TPI). She takes the check to United Bank, TPI's bank, which refuses to cash it because there are insufficient funds in TPI's account. Sue can recover from

a.neither TPI nor United.

b.TPI only.

c.TPI or United.

d.United only.

Question 10Regional Products, Inc., hires Sam to act as its agent. Tina sues Regional for Sam's negligent conduct. Regional's right to sue Sam for an equal amount of damages is the right of:

a.avoidance.

b.cooperation.

c.indemnification.

d.reimbursement.