In a promissory note scenario similar to the earlier example, which statements about liability after notices of dishonor are true?

• A. I, II & III
• B. II, III & IV
• C. I, III & IV
• D. I, II & IV

Answer: (A)

The important idea is how liability shifts after a promissory note is dishonored and the holder gives proper notice. The maker carries primary liability from the start, but once the note is dishonored and notice of dishonor is properly given, those who have endorsed the note become secondarily liable to the holder. The holder can pursue any endorser who has been properly notified for payment, and all endorsers who signed and were notified share in the liability. Liability to endorsers isn’t triggered unless notice has been given; without that notice, endorsers aren’t held responsible. So the statements that reflect endorsers’ secondary liability after proper notice, while the maker remains primarily liable and notice is required, are the true ones. The statement suggesting liability arises without notice is not correct. That alignment explains why this option is the correct choice.