Question 1

A holder must take an instrument in ____ to qualify as a holder in due course.

(1) The name of a corporation

(2) Good faith

(3) Absentia

(4) Repayment of a debt

Question 2

A purchaser of overdue paper is charged with ___ that some defense to the instrument may exist.

(1) Bad faith

(2) Knowledge

(3) Interest

(4) Sanctions

Question 3

Banks that hold consumer credit contracts are subject to all the personal defenses that the consumer buyer could have asserted against the seller of the goods. The source of this important consumer protection is

(1) An FTC rule

(2) State common law

(3) Article 3 of the Uniform Commercial Code

(4) Article 4 of the Uniform Commercial Code

Question 4

First Bank is a holder in due course of a check made out for $21,000. The drawer had made out the check for only $1,000, but a subsequent holder had carefully and cleverly altered the amount. What, if anything, can First Bank collect on this altered instrument?

(1) Bank can collect the full $21,000 because it is a holder in due course.

(2) Bank can collect the original amount of $1,000 intended by the drawer.

(3) Bank cannot collect anything because Bank is subject to the drawer's personal defense of material alteration.

(4) Bank cannot anything because Bank is subject to the drawer's real defense of fraud in the execution.

Question 5

If a holder of an instrument does not qualify as a holder in due course, the holders position is equivalent to that of a(n)

(1) Assignee

(2) Obligator

(3) Lender

(4) Debtor