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Chapter 30LIABILITY OF THE PARTIES UNDER NEGOTIABLE INSTRU- MENTS TRUE/FALSE 1. Any holder has all the rights relating to an instrument. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 2. An ordinary holder who is not a holder in due course can enforce the instrument in court unless the de- fendant proves a defense. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 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. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 4. To have the status of a holder in due course, a person must first be a holder. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 5. A person who buys an overdue instrument cannot be a holder in due course. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 6. Bad faith is established by proof that the transferee had knowledge of such facts as rendered it improp- er to acquire the instrument under the circumstances. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 7. Although courts do not measure the value given, bad faith sometimes may be indicated by the small value given. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 8. Instruments may not be negotiated if they have been dishonored by non-acceptance. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 9. A holder of a negotiable instrument cannot be a holder in due course when the holder learns of a de- fense to payment after the acquisition of the instrument. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 10. In general, a holder who has knowledge of the facts as would put a reasonable person on inquiry is deemed to have knowledge of the facts that would be learned if such inquiry were made. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 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. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 12. A holder through a holder in due course is subject to all defenses. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 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. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 14. A limited defense will not defeat a holder in due course but will defeat an ordinary holder. ANS: T TOP: AICPA BB-Legal MSC: AACSB Analytic 15. There are more universal defenses than limited defenses. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 16. A holder having the rights of a holder in due course is subject to the defense of fraud in the induce- ment. ANS: F TOP: AICPA BB-Legal MSC: AACSB Analytic 17. Unless a person making payment on a negotiable instrument demands its return, the holder of the pa- per can continue to negotiate it.... View Full Document

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