Commercial Paper

Question 1

Negotiable Instrument

Answer 1

1. Writing
2. Signed by maker/drawer
3. Payable to order/bearer (words of negotiability)
4. Unconditional promise
5. Sum certain
6. On demand or definite time
7. No additional undertakings

Question 2

Failures of “unconditional promise”

Answer 2

1. payment conditional on x
2. payment subject to another K
3. payment “must” come from particular fund

Question 3

Variable interest rates = sum certain?

Answer 3

OK if readily attainable by state or generally accepted index

Question 4

Order instrument

Answer 4

Payable to a specific person

Question 5

Bearer instrument

Answer 5

Anyone in possession has legal rights to the instrument

Question 6

Valid order instrument language

Answer 6

“Words of negotiability”

• to the order of ____
• to ____ or his order

Question 7

Valid bearer instrument language

Answer 7

• Payable to bearer
• Payable to the order of bearer
• Payable to cash
• Payable to _____

Question 8

Methods of taking NI as a holder

Answer 8

1. Issuance

2. Negotiation

Question 9

Valid negotiation of order instrument

Answer 9

1. Transfer of possession

2. Endorsement

Question 10

HDC

Answer 10

1. Value given
2. Good faith
3. W/o notice

Question 11

HDC - value

Answer 11

Give, do, or forgive

Question 12

Good faith inquiry

Answer 12

1. Honesty in fact

2. Observance of reasonable commercial standards (“things that make you go hmmmm”)

Question 13

Notice

Answer 13

re: overdue, dishonered, defenses against payment

Question 14

Defenses against HDC

Answer 14

Real defenses only

Question 15

Defenses against holder

Answer 15

Real & Personal defenses

Question 16

Real defenses

Answer 16

1. Infancy (necessities exception)
2. Adjudicated Incapacity
3. Immediate physical Duress
4. Illegality
5. Fraud in factum
6. Bankruptcy
7. SOL (6 years)

Question 17

Personal defenses

Answer 17

1. All valid claims to the instrument
2. All valid defenses available under K law
3. Nondelivery or delivery for special purpose
4. Theft

Question 18

Shelter Rule

Answer 18

Transferee has whatever rights transferor had

Question 19

Payees usually not HDCs

Answer 19

.

Question 20

Presentment warranties

Answer 20

1. Good title
2. No knowledge of unauthorized signatures
3. Not materially altered

Question 21

Agent liability

Answer 21

1. Lacked authority
2. Sign w/o indication of representative capacity
3. Sign w/o referencing principal

Question 22

Principal liability

Answer 22

1. Free if A signed w/o authority
2. Ratifies A’s unauthorized signature
3. Estopped if negligently contributed to A’s unauthorized signature
4. Names principal + shows A’s signature on his behalf