Question

44.John inherits a $10,000 promissory note payable to his late father.

a.John is a holder in due course.

b.John is not a holder in due course.

c.John can make himself a holder in due course by indorsing the promissory note, “HDC”.

d.cannot negotiate the promissory note without first obtaining an order from the probate court.

45.Negotiating an order instrument

a.requires delivery and indorsement.

b.requires delivery and either a written or oral order to pay.

c.requires delivery.

d.must be done in person.

46.An acceleration clause

a.can be used in a mortgage note but no other kind of promissory note.

b.allows the payee of a time instrument to demand payment of the entire remaining amount due.

c.cannot be enforced against a governmental agency (state or federal).

d.is considered unconscionable by the courts of some states.

Answer 1

44. a

To become a holder in due course of a negotiable instrument, a party must first qualify as a “holder” of the instrument. This means that the person must have possession of the instrument, and the instrument must be payable to that person or payable to bearer. Party who satisfies the formal requirements of being a holder must then meet eight additional requirements,

45. a

Negotiable instruments which are payable to order, any form of negotiation requires the payee to endorse the instrument to the new holder. This would involve the payee with signature liability.

An order instrument contains the name of a payee capable of indorsing it, as in “pay to the order of ". If the instrument is an order instrument, it is negotiated by delivery with any necessary indorsements. Negotiating order instruments requires both delivery and indorsement.

46. b

An acceleration clause is a contract provision that allows a lender to require a borrower to repay all of an outstanding loan if certain requirements are not met. An acceleration clause outlines the reasons that the lender can demand loan repayment and the repayment required.

Acceleration clauses are most common in mortgage loans and help to mitigate the risk of default for the lender. They are usually based on payment failures but they can be structured for other occurrences as well. In most cases, an acceleration clause will require the borrower to immediately pay the full balance owed on the loan if terms have been breached.

Without the inclusion of an acceleration clause in a tenants standard lease, the right for the landlord to commence a lawsuit against the tenant for damages will amass upon the lease termination.