Multiple choice

1. Sara enters an agreement with Darryl in which Darryl agrees to purchase a vacuum cleaner from Sara. Darryl signs a valid promissory note in favor of Sara, agreeing to pay $1,500 within 12 months. To close the sale, Sara misleads Darryl into believing that the vacuum cleaner is absolutely guaranteed to remove 100% of all dust particles in the home or he can be released from the promissory note, or get his money back if he has already paid the promissory note in full. In fact, no such money-back guarantee exists, and the vacuum cleaner doesn't remove 100% of all dust particles in Darryl's home. Twelve months later, Darryl refuses to pay the balance due on the promissory note. Which one of the following defenses may Darryl successfully raise to avoid payment of the note? 

A. Forgery 

B. Material alteration 

C. Fraud in the inducement 

D. Fraud in the execution 

2. Leroy writes a 450 check made payable to "Cash," and gives the check to Laurie. Which one of the following best describes what has happened? 

A. transfer by assignment 

B. Taking for value 

C. Transfer by negotiation 

D. Transfer to a holder in due course 

3. Janice gives Chandler a promissory note made out in her favor, signed by Joey for $1,000. When the note comes due, Joey asserts a personal defense to avoid liability on the note. Chandler isn't a holder in due course, and thus doesn't benefit from the protections afforded a holder in due course, because Chandler 

A. did not take the note in good faith. 

B. should have known a defense existed to the note. 

C. should have known the note would be dishonored. 

D. did not take the note for value. 

4. Jacobs arranged for his utility bill to be paid by automatic draft from his checking account. One month later, Jacob's utility bill tripled in amount from the month before, even though Jacob knew that he had used less electricity than the month before. Because Jacob believed the utility company his bank, five days before the draft was scheduled to be deducted, to refuse payment on the draft. The bank paid the draft. The bank's payment likely violated which one of the following laws? 

A. Federal Trade Commission Act of 1914 

B. Electronic Fund Transfer Act of 1978 

C. Banking Act of 1999 

D. Electronic Communications Privacy Act of 1986