Commercial Paper bar Flashcards

1
Q

For an Instrument to Be Negotiable, it must be

A

1) In writing;
2) Signed by the Maker
3) Containing an Unconditional Promise/ order to Pay a
4) Fixed Amount of Money
5) To an Order or Bearer
6) Payable on Demand or at Definite Time
7) Without Stating any Additional Undertaking or Instruction

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2
Q

An Instrument is Payable to Order if It

A

Identifies a person

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3
Q

If you lost an Instrument, you must

A

prove the terms of the instrument and person’s right to enforce instrument

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4
Q

To Negotiate an Instrument, holder Must

A

TRANSFER POSSESSION of the instrument AND INDORSE IT

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5
Q

Special Indorsement

A

Names an identified person as indorsee in addition to the indorsement

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6
Q

Ex. of Special Indorsement

A

Pay to Nancy Next /s/ Peter Payee

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7
Q

Endorser Liability

A

Indorser is secondarily liable on an instrument

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8
Q

Interest Payment

A

Unless explicitly stated, an instrument does not automatically convey an interest payment

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9
Q

Interest may be at a ___ or ___ rate

A

fixed or variable

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10
Q

How can interest be determined?

A

By reference to other documents or information

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11
Q

How is interest rate determined when the instrument specifies only that interest will be paid

A

established by the judgment rate in the JX of the place of payment of the instrument at the time interest first accrues

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12
Q

Which terms take precedence when there are conflicting or contradictory terms in instrument?

A

Handwritten over typwritten

typewritten over printed

Words over numbers

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13
Q

A holder in due course is one who takes item for

A

for value, in good faith and w/o notice that item was overdue or dishonored

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14
Q

Can HDC endorse check?

A

Yes notwithstanding a stop payment order unless a real defense is invoked

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15
Q

Is HDC status changed by subsequent notice?

A

No

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16
Q

When is HDC status defined?

A

when he accepts check in exchange for work

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17
Q

Real defenses

A

infancy, void K, bankruptcy, forgery, deception, discharge known to holder

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18
Q

Shelter Doctrine

A

Party that does not qualify for HDC status can assert the rights of the HDC as long as the party is not personally engaged in wrongdoing affecting the instrument

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19
Q

Effect of Stopping Payment on a Check

A

Does not avoid an obligation; merely delays payment

To avoid payment, D needs to establish a real defense against a HDC by preponderance of the evidence

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20
Q

For party to be Liability on Negotiable Note

A

must bear signature or that of an authorized rep for instrument to be negotiable

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21
Q

Bank May charge customer’s account for a check only for

A

properly payable items

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22
Q

Forged drawer’s signature makes check

A

not properly payable

23
Q

Drawer then has duty to

A

promptly report its unauthorized signature to BAnk and Bank must re-credit drawer’s account

24
Q

Presentment Warranty

A

Warranty as to drawer’s signature is breached only if warrantor has no knowledge that signature of purported drawer is unauthorized

25
Q

Knowledge means

A

actual knowledge

26
Q

WHen First Holder Endorses Check, he makes transfer warranties that

A

1) he was a person entitled to enforce check

2) all signatres on check, including his, are authentic and authorized (no forgery)

3) check has not been altered

4) check is not subject to any claims or defenses that could be raised against him

5) maker of the note is not insolvement

This enables collector to recover against same parties pursuant to tort theories

27
Q

Principal Liability for Instrument Signed by Agent: Authority

A

Principal’s liability on an instrument signed by agent turns on whether agent had authority, either actual or apparent

28
Q

If agent is authorized, principal is liable regardless of whether

A

agent signed principal’s name, agent’s own name or both

29
Q

Liability of principal if agent is not authorized

A

not liable

30
Q

Ratification: Even if an agent acts with no power to bind principal, principal can

A

ratify an act performed by another person whether or not person is an actual agent of principal

31
Q

Ratification occurs when

A

principal affirms a prior act done or purported to be done on principal’s behalf

32
Q

Principal’s affirmation may either be

A

express or implied

Consideration is not required

33
Q

Requirement for accommodation party

A

cannot have received a direct benefit from the instrument

33
Q

Accommodation Party

A

type of surety, or one who guarantees debt of another

34
Q

Capacity that accommodation party is liable on instrument

A

liable in whatever capacity he has signed

35
Q

Accommodator’s defense

A

if a party’s obligation to pay an instrument is secured by an interest in collateral and person entitled to enforce instrument impairs the value of the interest in collateral, the obligations of an accommodation party are discharged to the extent of impairment

35
Q

Accommodation party: Cosigner

A

assumed to be an accommodation party

36
Q

Impairing value of an interest in collateral includes

A

1) failure to obtain or maintain perfection or recordation of the interest in collateral

2) failure to release collateral w/o substitution of collateral of equal value

3) failure to perform a duty to preserve the value of collateral owed to a debtor or surety or other person secondarily liable; or

4) failure to comply w applicable law in disposing collateral

36
Q

Burden of proving collateral’s impairment is on

A

party asserting discharge

37
Q

An accommodation party is liable on the instrument only if

A

1) the person entitled to enforce the instrument has reduced his claim to judgment against the other party and execution is returned unsatisfied

2) other party has become insolvent

3) other party cannot be served w process; or

4) it appears useless to proceed against the other party

38
Q

A surety who makes payment on a loan on behalf of a principal is entitled to

A

all of the rights and remedies of a creditor

39
Q

An alteration is an

A

unauthorized change that purports to modify the obligation of a party

40
Q

Fraudulent Alteration

A

If the alteration is done fraudulently by holder, it would discharge the liability of the obligor

41
Q

If alteration is not done fraudulently, obligor would remain liable but only on

A

the original terms of the obligation

42
Q

Once drawee-bank has paid a check, it is subrogated to the rights of

A

any HDC payee or other holder on a check against drawer

43
Q

Consequently, when there is an HDC with respect to a check, the customer cannot prove loss because

A

the HDC could have demanded payment from the customer-drawer even if the bank complied with the stop-payment order.

44
Q

If a check is dishonored, the drawer has generally promised

A

to pay the holder according to the terms of the check when it was issued.

45
Q

However, the drawer may usually refuse to pay a mere holder of the check if

A

the drawer has a defense that would permit it not to pay the payee.

46
Q

If a promise or order contains an express condition to payment, it is

A

not a negotiable instrument

47
Q

A negotiable instrument must be payable in money, which includes

A

currency and currency funds… principal amount must be a fixed amount of money

48
Q

An order instrument is payable only to

A

the person named or to his order

Term order MUST APPEAR

49
Q

Bearer instrument is payable to

A

anyone who possesses the instrument

50
Q

An instrument is payable at a definite time if it is payable ___

A

1) on a fixed date,

2) at end of a definite period after sight or acceptance

3) at time readily ascertainable when the instrument is issued