big ole deck

Question 1

What is a note?

Answer 1

A written promise to pay.

Question 2

If a note is created by a bank, what is it called?

Answer 2

a “certificate of deposit”

Question 3

What is a draft?

Answer 3

A written order by one person to another, directing the latter to pay money to a third person

• a check

Question 4

Types of negotiable instruments?

Answer 4

A note and a draft

Question 5

Who is a drawer?

Answer 5

A person who signs or is identified in a draft as a person ordering payment.

• bank’s customer

Question 6

Who is a drawee?

Answer 6

A person ordered in a draft to make a payment

• the bank

Question 7

Who is the payee?

Answer 7

The person the check is written out to

• who the bank pays

Question 8

“Good faith”

Answer 8

means honesty in fact and the observance of reasonable commercial standards of fair dealing

Question 9

Who is a maker?

Answer 9

A person who signs or is identified in a note as a person undertaking to pay.

Question 10

Who is a remitter?

Answer 10

A person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.

Question 11

What is a negotiable instrument?

Answer 11

An unconditional promise or order to pay a fixed amount of money, provided the instrument meets certain conditions

Question 12

7 criteria for a negotiable instrument

Answer 12

1. must be payable to bearer or to order
2. is payable on demand or at a definite time
3. in writing
4. signed
5. contain an unconditional promise or order
6. no other undertakings other than promise to pay
7. for fixed sum of money

Question 13

3-103(a)(3) states a negotiable instrument cannot state any other undertaking or instruction

what are the three exceptions?

Answer 13

1. an undertaking or power to give, maintain, or protect collateral to secure payment
2. an authorization or power to the holder to confess judgment or realize on or dispose of collateral
3. a waiver of the benefit of any law intended for the advantage or protection of an obligor

Question 14

If an instrument falls within the definition of both a “note” and a “draft”, what happens?

Answer 14

The person entitled to enforce the instrument may treat it as both

3-104(e)

Question 15

“Issue”

Answer 15

the first delivery of an instrument by the maker or drawer, whether to a holder or non holder, for the purpose of giving rights on the instrument to any person

3-105(a)

Question 16

Is nonissuance a defense?

Answer 16

Yes, 3-105(b)

Question 17

A promise or order is unconditional unless what 3 things?

Answer 17

1. an expressed condition to payment
2. that the promise or order is subject to or governed by another record
3. that rights or obligations with respect to the promise or order are stated in another record

3-106(a)

Question 18

Does a reference to another record itself make the promise or order conditional?

Answer 18

No

3-106(a)

Question 19

Texas millionaire Howard Chaps signs all of his checks with a small branding iron that prints a fancy “X” on the signature line. Are his checks negotiable?

Answer 19

Yes

1-201(37); Official Comment 39

Question 20

Walter Capitalists is the sole proprietor of the Capitalist Company.

Answer 20

yes

Question 21

“Drawee”

Answer 21

a person ordered in a draft to make payment

Question 22

“Drawer”

Answer 22

a person who signs or is identified in a draft as a person ordering payment

Question 23

“Maker”

Answer 23

a person who signs or is identified in a note as a person undertaking to pay

Question 24

“Order”

Answer 24

a written instruction to pay money signed by the person giving instruction

the instruction may be addressed to to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession

Question 25

“Promise”

Answer 25

a written undertaking to pay money signed by the person undertaking to pay.

an acknowledgement of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation

Question 26

Requirements for HDC

Answer 26

1. takes instrument for value
2. in good faith
3. without notice that it is overdue or has been dishonored or is subject to claims or defenses against it

Question 27

Requirements for Holder

Answer 27

1. Proper indoresment

2. Possession

Question 28

If the instrument shows signs of forgery or alteration, can a person still become a HDC

Answer 28

No

3-302(a)(1)

Question 29

Can a person achieve HDC status after only partially performs promise on the instrument?

Answer 29

the holder may assert rights as a HDC only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance

Question 30

Teresa agrees to pay Harold $8,000 for a note payable for $10,000. However, she has only paid $4,000 and then subsequently learns that seller breached the contract.

What is the extent of Teresa’s HDC rights?

Answer 30

$5,000

because Teresa has paid only half of the agreed upon consideration and this is only a HDC for one-half of the note’s face value.