Commercial Paper bar Flashcards
For an Instrument to Be Negotiable, it must be
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
An Instrument is Payable to Order if It
Identifies a person
If you lost an Instrument, you must
prove the terms of the instrument and person’s right to enforce instrument
To Negotiate an Instrument, holder Must
TRANSFER POSSESSION of the instrument AND INDORSE IT
Special Indorsement
Names an identified person as indorsee in addition to the indorsement
Ex. of Special Indorsement
Pay to Nancy Next /s/ Peter Payee
Endorser Liability
Indorser is secondarily liable on an instrument
Interest Payment
Unless explicitly stated, an instrument does not automatically convey an interest payment
Interest may be at a ___ or ___ rate
fixed or variable
How can interest be determined?
By reference to other documents or information
How is interest rate determined when the instrument specifies only that interest will be paid
established by the judgment rate in the JX of the place of payment of the instrument at the time interest first accrues
Which terms take precedence when there are conflicting or contradictory terms in instrument?
Handwritten over typwritten
typewritten over printed
Words over numbers
A holder in due course is one who takes item for
for value, in good faith and w/o notice that item was overdue or dishonored
Can HDC endorse check?
Yes notwithstanding a stop payment order unless a real defense is invoked
Is HDC status changed by subsequent notice?
No
When is HDC status defined?
when he accepts check in exchange for work
Real defenses
infancy, void K, bankruptcy, forgery, deception, discharge known to holder
Shelter Doctrine
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
Effect of Stopping Payment on a Check
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
For party to be Liability on Negotiable Note
must bear signature or that of an authorized rep for instrument to be negotiable
Bank May charge customer’s account for a check only for
properly payable items