Commercial Paper

Question 1

Against whom can real defenses be enforced?

Answer 1

Real defenses can be asserted against both holders and holders in due course.

Real defenses: infancy, duress, and more.

Personal defenses: embezzlement.

Question 2

What does the alteration of a negotiable instrument usually do?

Answer 2

It discharges the obligation of a party whose obligation is affected by the alteration.

HOWEVER, a party who is negligent, and the negligence substantially contributes to the alteration, cannot assert an alteration defense against an HDC.

Question 3

If an HDC becomes aware of a defect in the transaction after she acquired the note, how is her status affected?

Answer 3

This does NOT affect her status as an HDC.

Question 4

Must a holder of an instrument first demand payment from the drawer of a check upon dishonor?

Answer 4

No, they can first seek payment from an indorser.

Question 5

List all the real defenses.

Answer 5

Infancy, incapacity, duress, illegality, fraud, discharge in insolvency proceedings, alteration and forgery, statute of limitations, accomodation party.

Remember: Infants in danger ice fire instead of accomodating unpleasantries.