Ch13 Flashcards
Someone who receives a promissory note has the option to sell it to another party
Negotiable instrument have the option to sell it to the other party
Know what results when a negotiable instrument is transferred by negotiation
Takes the instrument free of any the transferor’s contract obligations
If an instrument turns out to be nonnegotiable, what law applies to disputes regarding the instrument
Common Law
Know the requirements to be a holder in due course
Give value for the negotiable instrument
Take the instrument without knowledge that it is overdue or defective
Take the instrument in good faith
Know the four types of negotiable instruments
Drafts, Checks, Notes, Certificates of Deposit
Know what the Whitaker v. Wedbush Securities, Inc court said regarding the defendant brokerage firm was a bank under the UCC
Under UCC rules, Wedbush was effectively a bank and responsible for the loss
Know the UCC definition of a note
A promise not an order by one party to pay a certain sum of money to another party, the payee
Know the UCC definition of a draft
A binding order to pay a fixed sum of money that involves three parties
What do you call an agreement to provide security in real property
Mortgage
What do you call a pledge of personal assets as security for the debt of a business?
Surety/Gurantee
Know what the General Electric Business Financial Services v. Silverman court said about asserting defenses based on oral agreements that modified the written guaranty contract
Court granted summary judgment because the UCC bars affirmative defenses that rely on oral promises
If a surety pays the principal’s debt, what rights does the surety have against the principal?
Can sue the borrower and make the borrower pay them back
Know which part of the UCC regulates credit and financing for personal property
Article 9
Know what perfection means under UCC Art 9
To establish superior rights, to perfect the security interest, the creditor must give notice of the existence of the security interest so other potential creditors are aware that they will stand behind the creditor with the perfected interest in trying to get paid
Know who to perfect a security interest
File a UCC 1 statement
Know the holding of Fordyce Bank and Trust v. Bean Timberland about buyers in the ordinary course of business
The bank get nothing from the lumber yards there were no responsible for the security interest and breached no duty
Know the definition of mechanic’s lien
Provide materials or labor to improve real estate and you don’t get paid
Know what the court in Cit Bank, N.A v. Heirs said about priority of liens based on perfection
The falcon head lien was older but was perfected late so the CIT had priority
People with higher than average income have to file Chapter 13 instead of Chapter 7 bankruptcies
People with higher than average income
Know what the In the Matter of Kmart Corp. court held regarding paying some critical vendor creditors in full while not paying other creditors
Even if [the Code] allows critical-vendors orders in principle, preferential payments to a class of creditors are proper only if the record shows the prospect or benefit to the other creditors. This record does not, so the critical-vendors order cannot stand.
Requirements for Negotiable Instruments
be written
Be an unconditional order to promise to pay
Be signed by the maker or drawer
Be payable on demand or at a specified time
Be made out “to order” or “to bearer”
Must state a sum certain of money
Negotiable Instruments
MEAN THE HOLDER CAN SELL IT TO ANOTHER PARTY
Types
Drafts
Checks
Notes
Certificates of deposit
