Question

To be liable on a negotiable instrument, a person must:

a. sign the instrument.

b. have a relative who is not an agent sign the instrument.

c. draft an arbitration clause for the instrument.

Answer 1

The correct answer is letter "A": sign the instrument.

Step-by-step explanation:

When talking about negotiable instruments, there are two types of liabilities: Signature Liability and Warranty Liability. Signature Liability refers to those documents where who signs is potentially liable for the responsibilities of the document stated. Warranty Liability is where the liability relies on the person to whom the document was transferred in good faith.

In both cases, the initial holder of the document must sing the instrument so it will be clear to whom belongs the liability.