Commercial Paper Flashcards
“Accommodation Party”
Person who signs simply to lend his credit. He does not receive direct value.
Why does an accommodation party not incur liability on transfer?
Because (1) he doesn’t transfer the instrument and (2) he doesn’t receive consideration.
“Alteration”
Unauthorized change to instrument.
“Dishonor”
Occurs when presentment for payment is made and payment is refused.
When does dishonor not occur?
When instrument is refused on basis that it lacks a necessary indorsement.
Check is dishonored by a payor bank when:
the bank
(1) returns the check
(2) sends timely notice
(3) becomes accountable for amount of check
When is a note payable on demand dishonored?
When it is duly made to maker and note not paid when presented.
When is draft payable on demand dishonored?
When it is duly made to drawee and draft is not paid on day of presentment.
When is note not payable on demand but payable to bank dishonored?
When it is duly made and not paid, and becomes payable or on day of presentment.
When is note not payable on demand and not payable via bank dishonored?
When it is not paid when it becomes payable.
When must notice of dishonor by bank be given?
Before midnight deadline.
When must notice of dishonor by a person be given?
30 days.
When is delay in giving notice of dishonor justified?
Circs beyond control or you used reasonable diligence.
When is the holder in possession of the instrument?
When it is (1) payable to bearer or (2) payable to an identified person who has the instrument.
Effect of forged indorsement:
Possessor cannot be a holder.
