East Mississippi Community College

ECON 2123

Chapter 30-LIABILITY OF THE PARTIES UNDER NEGOTIABLE INSTRUMENTS

TRUE/FALSE

1)Parties with rights in a negotiable instrument can be assignees or holders.

2. A holder can recover from any of the parties who are liable on the instrument, regardless of the order of the signatures on the instrument.

3. The law gives certain holders of a negotiable instrument a preferred standing by protecting them from all defenses when they sue to collect payment.

4. To have the status of a holder in due course, a person must first be a holder.

5. Unlike ordinary holders or assignees, holders in due course take free of contract assignment defenses that are good against ordinary holders or assignees.

6. Under the “close-connection” doctrine, a holder has taken so many instruments from its transferor or is so closely connected with the transferor that any knowledge the transferor has is deemed transferred to the holder, preventing holder in due course status.

7. For the purposes of determining holder in due course status, the requirement of value is similar to consideration.

8. Instruments may not be negotiated if they have been dishonored by non-acceptance.

9. A holder of a negotiable instrument cannot be a holder in due course when the holder learns of a defense to payment after the acquisition of the instrument.

10. In general, transferees who are aware of facts that would make a reasonable person ask questions are deemed to know what they would have learned if they had asked questions.

11. A person who buys a note from a holder in due course knowing that the maker has a defense will not be a holder through a holder in due course.

12. A holder through a holder in due course is subject to all defenses.

13. A holder who is neither a holder in due course nor a holder through a holder in due course is subject to every defense, just as though the instrument were not negotiable.

14. A limited defense will not defeat a holder in due course but will defeat an ordinary holder.

15. An ordinary contract defense is a limited defense not available against a holder in due course.

16. A holder having the rights of a holder in due course is subject to the defense of fraud in the inducement.

17. Incapacity of the maker or drawer is a limited defense not available against a holder in due course.

18. Fraud as to the nature or essential terms of an instrument is a limited defense not available against a holder in due course.

19. A universal defense will defeat a holder in due course and a holder through a holder in due course.

20. The fact that a person signs a negotiable instrument because he or she is fraudulently deceived regarding its nature or essential terms is a defense available against all holders.

21. The defense that a signature was forged or signed without authority cannot be raised against any holder if the person whose name was signed has ratified it.