Commercial Paper/Negotiable Instruments

Question 1

Bank’s Liability

Postdated Check

Answer 1

Does not represent a current demand to pay but rather in the future

The bank is protected against liability for paying the check before its date unless the customer expressly notifies the bank of the postdating

If a bank charges an account for a check before the date stated in the notice of postdating, the bank is liable for the resulting loss

Question 2

Check Conflict

Answer 2

Whenever there is conflict between the written words and numbers on a check, the written words prevail

Question 3

Alteration

Answer 3

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

Good faith and knowledge of alteration?

Question 4

Unauthorized?

Answer 4

A check can be enforced according to its altered format since it was not for an amount in excess of the debt owed to the payee

Also, if alteration was made possible because of the failure to exercise ordinary care

Question 5

Holder in Due Course

Requirements

Question 6

Holder in Due Course

For Value Holder

Question 7

Holder in Due Course

Good Faith Holder

Question 8

Holder in Due Course

Without Notice

Question 9

Holder in Due Course

Test for Notice