Commercial Paper (UCC Art 3)

Question 1

REQUIREMENTS TO BECOME A HDC

Answer 1

must take the instrument:

(1) As a holder
(2) For Value
(3) In Good Faith
(4) Without Notice of Infirmities

Question 2

FORMAL REQUIREMENTS OF NEGOTIABILITY

Answer 2

(1) Writing, signed by maker/drawer or authorized agent
(2) Unconditional Promise Or Order
(3) To pay a fixed amount of money
(4) Payable to order or to bearer
(5) Payable on demand or at a definite time
(6) No additional undertaking or instructions

Question 3

DEFENSES

Answer 3

REAL - against all holders including HDC
(1)	Alteration
(2)	Forgery 
(3)	Fraud in the Factum  
(4)	Illegality - where void
(5)	Infancy - where K w/ minors are void or voidable
(6)	Incompetency - where void
(7)	Duress - where void
(8)	Discharges (known to HDC, in insolvency proceedings)
(9)	SOL
(10)	Suretyship (if HDC knows of accom, takes subject to defenses)
Personal - Non_HDC -- contract defenses

Question 4

CLAIMS IN RECOUPMENT

Answer 4

if the claim arose from the transaction that gave rise to the instrument; but the claim of the obligor may be asserted against a transferee of the instrument only to reduce the amount owing on the instrument at the time the action is brought.

Question 5

WHEN PRESENTMENT IS EXCUSED

Answer 5

(1) Presenter cant locate one liable to whom presentment is be made
(2) Maker/Acceptor has repudiated obligation to pay
(3) Instrument’s terms do not require presentment
(4) Drawer/indorser has waived the presentment requirement
(5) Drawer has instructed drawee not to pay

Question 6

Presentment Warranties

Answer 6

breach allows payor bank to sue “upstream” to all those whose hands the check passed through

(1) Warrantor = entitled to enforce the instrument
(2) Draft has not been altered
(3) Warrantor has no knowledge that drawer’s signature unauthorized

Question 7

DISHONOR

Answer 7

Time of Dishonor
Time Instrument – Later: day becomes payable, day of presentment
Demand Instrument - on the day of presentment
(b) Notice of Dishonor
(i) Indorser’s Liability - not liable unless given timely notice of dishonor
(ii) Time of Notice - w/in 30 days after dishonor occurs