Commercial Paper Flashcards
Parties to promissory note
Maker and payee
Parties to a draft
Drawer, drawee, payee
Indorser
One who signs on the back
Requirements for Negotiable Instument
1) Writing
2) Payable to order or bearer
3) Signed by maker or drawer
4) Sum certain
5) Unconditional promise and no additional promises
6) Payable on demand or at a definite time
7) Payable in currency
Two ways defendant gets sued in commercial paper problem
1) Contract/signature liability
2) Warranty or transfer liability
Basis for contract liability
Signing the instrument
“Without recourse”
Disclaims liability for signing an instrument
Who can be sued for breach of warranty for commercial paper?
Anyone who sells the instrument (excludes donor)
Who may sue under a warranty theory?
1) If instrument is indorsed- anyone in possession
2) If not indorsed, only D’s immediate transferee may sue
Five warranties made by defendant
1) Defendant promises good title
2) That all signatures are genuine and authorized
3) Instrument has not been materially altered
4) No defense or claim good against D (instrument is enforceable)
5) No knowledge of bankruptcy or insolvency action against maker or drawer
Negotiation for instrument payable to order of specific payee
Negotiated by delivery to that payee. Subsequent negotiation requires payee indorse and delivery to transferee
Negotiation where payable to bearer
Does not require indorsement
Types of indorsements
Special/blank and restrictive/unrestrictive
Special indorsement
Names particular person as indorsee who must sign for it to be further negotiated
Blank indorsement
Does not name a specific indorsee. May be negotiated by delivery alone
