Commercial Paper

Question 1

What are the 8 elements of Negotiability?

Answer 1

1. In writing
2. Signed
3. Unconditional promise or order to pay
4. For a Fixed Amount
5. In Money
6. No other undertaking or instruction (MONEY ONLY)
7. Payable on demand or at a definite time
8. Contains words of negotiability (Bearer or Order Paper)

Question 2

What are the three types of Indorsements?

Answer 2

1. Blank–signature only. Creates Bearer Paper
2. Special Indorsements–“Payable to” plus signature. Creates an Order Paper. Only person whose name is after the “Payable to” can cash it.
3. Restrictive Indorsement. “For Deposit Only” If bank does not deposit the money into that account then they are liable for conversion.

Question 3

Who does a Presentment Warranty protect?

Answer 3

Drawees and Payors

Question 4

What is required for a Stop Payment Order?

Answer 4

Written, Signed, Dated, Item is described with certainty, and it is within 6 months

Question 5

What classification does a check get if it is not payable on delivery?

Answer 5

Dishonored

Question 6

What defenses may be asserted against a Holder in Due Course?

Answer 6

Fraud in the factum and alteration of instrument.

Question 7

What notice may a Holder in Due Course have and still maintain their status?

Answer 7

Payor has defaulted on the interest payments but NOT principal balance.