Commercial Paper Essays Rule Statements Flashcards
whenever there is a conflict between the written words and the numbers
the written words will prevail
where a person fails to exercise ordinary care and thereby substantially contributes to an alteration of an instrument,
that person is precluded from asserting the alteration against a person who, in good faith, pays the instrument and takes it for collection
antecedent debt is
proper value
a bank does not owe any duty to
a holder of a draft drawn on the bank to pay the draft, rather the bank’s only obligation runs to its customer, and that obligation is to pay drafts that are property payable
if a negotiable instrument is negotiated to a HDC
HDC takes free of most defenses
checks are
negotiable instruments
negotiation of an order instrument requires
a transfer of possession plus the indorsement of the payee
where an agent signs an instrument on behalf of a principal,
the principal will be bound to the same extent as if the signature were on a simple contract
fraudulent alteration of a check
generally discharges all parties from liability on the check
incoplete instrument altered by unauthorized completion
person who takes the instrument for value, in good faith, and without notice may enforce the instrument according to its terms as completed
infancy is
real defense, raised against HDC
as between two creditors with perfected security interests in an item of collateral, priority goes to
the first to file or perfect, whichever occurs first
for a security interest to be perfected
it must attach to the collateral
a security interest attaches to goods when
1) the parties agree to create a security interest, evidenced by an authenticated security agreement or the secured party’s possession of the goods, 2) the creditor gives value, and 3) the debtor has rights in the goods
security interests in most goods can be perfected by
filing a financing statement
HDC’s are only subject to
real defenses, not personal defenses
a forgery in the chain of title
precludes anyone in possession from being a holder
a holder is
someone in possession of an instrument with a right to enforce it
a note payable to a specific payee may be negotiated only if
it is indorsed by the payee
a person whose negligence substantially contributes to a forgery is estopped from
asserting the forgery against someone who took the instrument for value and in good faith
a person who transfers an instrument for consideration warrants that
1) she is entitled to enforce the instrument,
2) all signatures on the instrument are authentic and authorized,
3) no defenses are good against her,
4) the instrument has not been altered
5) she has no knowledge of insolvency proceedings
a person who signs a note other than as a maker or acceptor
incurs secondary liability as an indorser, becoming obligated to pay it if the maker does not pay
forged signature is signature of forger
to be negotiable, a note must be
signed by its maker and be an unconditional written promise to pay a fixed amount of money, with or without interest, to order or bearer, on demand or at a definite time, without any undertaking or instruction not authorized by law
to be properly negotiated a note payable to a pyee must be
indorsed by the named payee and delivered to the holder
fraud in the execution of a note is
a real defense
fraud in the inducement of a note is
not a real defense
when the holder of a note transfers it for consideration, it makes a warranty that
no defense of any party is good against the transferor
transfer warranty can be negated (except on checks) by
language clearly indicating that no warranty is being made (without recourse)
_____ are liable for unaccepted checks dishonored by the bank
drawers
shelter doctrine
a transferee of an HDC takes the rights of an HDC
a bank can charge an item against a customer’s account only if the item is
properly payable, must be authorized by customer
a check is properly payable only if
it is signed by the drawer or the drawer’s authorized agaent
a person is precluded from raising an unauthorized signature if
the person failed to exercise ordinary care in preventing the forgery and that failure substantially contributed to the forgery
in Virginia, if a claim is unliquidated or subject to dispute, it can be discharged in full if
the person against whom the claim is asserted in good faith tenders an instrument that conspicuously states that it is tendered in full satisfaction of the claim and the claimant obtains payment of the instrument
Virginia does not allow avoidance where
the altered instrument was tendered in good faith as a full payment of the disputed debt
a customer is precluded from asserting a forgery or alteration of his signature if
he does not notify the bank of either issue within the prescribed period
within 1 year after the bank made the instrument available to him
if a statement has been available to a customer for a reasonable period and he does not object to any signatures or alterations within 30 days
the customer is estopped from demanding recredit on any other items forged by the same wrongdoer
an instrument is conditional if
it expressly states a condition for payment or states that the promise or order is subject to or governed by another writing
a negotiable instrument must be payable to
order or bearer
an instrument is payable at a definite time if it is payable
on a fixed date, specified periodd of time after sight or acceptance, or at some time readily ascertainable
promissory notes are governed by
Article 3 of the UCC
a principal will be bound by the act of an agent if
the agent had actual or apparent authority to act on the principal’s behalf
if a signature is unauthorized, a principal may still be liable if
she ratifies the signature
ratification occurs when
a principal knowingly adopts a signature as her own or when, with full knowledge of the circumstances, she appropriates the benefit of the unauthorized signing or fails to deny the validity of teh signature
a guarantor is
a person who promises to pay a debtor’s obligation if the debtor defaults, and whom the creditor may approach for payment only after seeking payment from the debtor
one who guarantees a debtor’s performance on a promissory note is
an accomodation party, incurs liabiulity on the instruemnt in the capacity in which he signs
if an accomodation party is forced to pay the principal debotr’s debt,
he is subrogated to the rights of the party paid, including any rights to collateral
guarantor of collection becomes liable when
execution of a judgment against the debtor has been returned unsatisfied, the debtor is insolvent, or it otherwise appears that it is useless to proceed against the debtor
a negotiable instrument may be transferred by its holder to
anyone
a restrictive indorsement is not effective to
prevent further transfer or negotiation of the instrument
in Virginia, if the contract or other instrument does not fix an interest rate, the court will
imply a judgment rate, and interest is payable from the date of the instrument
a check does not discharge the obligation for which it is given, but merely
suspends the obligation until paid
if a check payable to a particular person is lost or stolen and is not indorsed by the payee
the payee retains ownership of the check
an oral stop payment order is valid for
14 days
warranty of presentment
party presenting the check warrants title to the instrument and warrants that the presenter is entitled to enforce the instrument
