1.

Answers:
a. Incorrect. These are not the two kinds of liability associated with
negotiable instruments.
b. Correct. Warranty and signature liability are the two kinds of
liability associated with negotiable instruments.
c. Incorrect. There is no essential or nonessential liability for
negotiable instruments.
d. Incorrect. There is no dispatch and relief liability for negotiable
instruments.
2. Answers:
a. Incorrect. Jeff does not dishonor the check; the bank does.
b. Incorrect. The bank dishonors the check; it does not abscond with
the check.
c. Correct. The bank dishonors the check.
d. Incorrect. Jeff is not secondarily liable on this check.
3. Answers:
a. Incorrect. Parties who are primarily liable may raise defenses to
payment.
b. Incorrect. Parties who are primarily liable are absolutely required to
pay unless they raise a valid defense.
c. Incorrect. Such parties are required to pay before parties with
secondary liability, not the other way around.
d. Correct. Parties with primary liability on an instrument must pay
unless they have a valid defense.
4. Answers:
a. Incorrect. To hold a drawer secondarily liable on a domestic check,
the check must be presented within thirty days of its date.
b. Correct. To hold a drawer secondarily liable on a domestic check,
the check must be presented within thirty days of its date.
c. Incorrect. To hold a drawer secondarily liable on a domestic check,
the check must be presented within thirty days of its date.
d. Incorrect. To hold a drawer secondarily liable on a domestic check,
the check must be presented within thirty days of its date. (Note,
though, that to hold an indorser secondarily liable, a domestic check
must be presented for payment within thirty days after the
indorsement.)
5. Answers:
a. Incorrect. An agent may work for an actor, but the legal term for the
person on whose behalf an agent works is a principal.
b. Incorrect. An agent does not represent a representative, but a
principal.
c. Correct. An agent agrees to represent a principal.
d. Incorrect. An agent does not agree to represent a commissioner.
6. Answers:
a. Correct. An authorized agent who clearly names the principal may
bind that principal.
b. Incorrect. Wilkie is liable because Ned acted within the scope of his
agency.
c. Incorrect. Wilkie does have primary liability because Ned acted
correctly.
d. Incorrect. Ned does not have primary liability because he acted
correctly in this case. Wilkie has primary responsibility.
7. Answers:
a. Incorrect. Wilkie does not bear the responsibility in this case; rather,
the bank does because it cashed a check with a forged signature.
b. Correct. The bank should not have cashed this check and so it is
liable.
c. Incorrect. The bank bears the liability in this case.
d. Incorrect. Leslie is not the only liable party; the bank is also liable for
paying the check over a forged signature.
8. Answers:
a. Incorrect. This is one of the transfer warranties.
b. Correct. Transfer warranties include the right of the transferor to
enforce the instrument.
c. Incorrect. This is one of the transfer warranties.
d. Incorrect. This also is one of the transfer warranties.
9. Answers:
a. Incorrect. Breach of contract is a personal defense, not a universal
defense.
b. Incorrect. Lack of consideration is a personal defense.
c. Correct. Forgery is a universal defense to payment so long as the
maker or drawer does not ratify the forgery or is otherwise
precluded from denying the forgery.
d. Incorrect. Nondelivery of the instrument is a personal defense that
may be used to avoid payment.
10. Answers:
a. Incorrect. This is a universal defense.
b. Incorrect. This is a universal defense.
c. Correct. This is not a universal defense but a personal defense.
d. Incorrect. This is a universal defense.