Acquiring Holder Status

Question 1

The delivery of an instrument from the maker/drawer to payee/holder is a

Answer 1

Issuance

Question 2

Negotiation

Answer 2

Is a transfer of possession, whether voluntary or involuntary by a person other than the issuer to a person who becomes a holder

Question 3

An order instrument can only be negotiated if it is

Answer 3

1) Indorsed; and
2) Possession is Transferred

Question 4

A person can become a holder in 2 ways

Answer 4

1) Issuance and
2) Negotiation

Question 5

A bearer instrument can be negotiated by

Answer 5

Transfer of possession

Question 6

Types of indorsements

Answer 6

1. Special indorsement- when indorsement is made to a specific person
2. Blank indorsement- when indorsement is not made to a specific person
3. Qualified indorsement- Used to limit’s one liability on an instrument (writes “without recourse” which removes liability from the instrument)
4. Restrictive indorsement- used to limit what the holder can do with the instrument Ex; For deposit only (cannot include conditional language though)
5. Anamalous indorsement - Used by accomodation parties

Question 7

Payable jointly requries

Answer 7

All payees to indorse for a valid negotiation

“An instrument payable to the order of Paul and Perry”

Question 8

A bearer instrument can be negotiated by

Answer 8

Transfer of possession

Question 8

Payable severally requires

Answer 8

Either party can sign the instrument for a valid negotiation

“an instrument payable to the order of Paul or Perry”