consideration Flashcards
does the burden of proof to prove a negotiable instrument has been issued for a valuable consideration rest on the holder?
No, Section 24
how many presumption are found in section 24?
2
(1) every negotiable instrument is demeed to have been issued for a valuable consideration
(2) all the persons whose signature appears on the instrument are presumed parties thereon
Can these presumption be proven otherwise
yes, they are not conclusive
“all the person whose signature appears on the instrument are presumed parties thereon for value”, doe sthis apply to all kinds of parties?
No, it does not apply to accommodation party. However, the accommodation party cannot refuse payment
What constitutes value?
consideration sufficient to support a simple contract. included in the concept are existing or pre existing debts
who is a holder for value
the one who gives valuable consideration for an instrument issued or negotiated to him
when the holder has a lien on the instrument, to what extent is he a holder for a value
only to the extent of his lien on the instrument
meaning of “want in consideration”
the instrument is not supported by a valuable consideration or lacking of consideration
what if the instrument has partial failure of consideration?
the parties shall have a right over that partial amount only and not for the whole amount
what does it mean that want of consideration as a defense
when an instrument lacks consideration, the party being asked to pay can raise the defense so that he could validly refuse payment. lack of consideration is a personal defense which can be raised against non-holder in due course
accommodation party is a person who signs the instrument as _____?
a maker, drawer, acceptor or indorser
does accommodation arrangement apply to all kinds of negotiable instrument?
yes, it applies to both bills and notes
what are the requisites of a valid accommodation arrangement?
(1) AP must be signing as a drawer, acceptor, maker, or indorser
(2) he must not receive the value therefor
(3) he must sign for the purpose of lending his name or credit
in what capacity is the AP is signing?
he signs a s a maker, acceptor, drawer or indorser
why cant the AP sign as an accomodating drawee?
drawee affixing his signature on the instrument becomes the acceptor
the accommodation party must not receive value therefor? what does it mean
the AP signs without receiving any value or consideration FROM the instrument but could receive value from the party being accommodated
is the AP is a party to the instrument?
it appears that he is a party to the instrument because his name appears thereon, however the real party to the instrument is the party being accommodated since the accommodating party did not receive any value by virtue of the instrument
ILLUSTRATE AN ACCOMMODATION MAKER
accommodated party-payee
B- indorsee or holder of the instrument
can the accommodated party enforce payment or reimbursement from the accommodating party by virtue of negotiable instrument
No, as mentioned, there is no valuable consideration between the accommodating or accommodated parties by virtue of negotiable instrument.
what if the accommodated party enforces payment or reimbursement from the accommodating party?
the accommodating party can raise the defense of absence of consideration and such defense, although personal, can be successfully raised against the accommodated party since the latter is not a holder in due course
can the accommodation party interpose the defense of want of consideration against a holder in due course?
no, the absence of consideration is a personal defense and cannot be raised against a holder in due course
what if the holder knows that the accommodating party is just acting as such to accommodate another party, can the holder still ask payment from the accommodating party?
yes,, holder for the value can still ask payment from the accommodation party even if he knows that the latter is just acting as such.
being a holder in due course still, the personal defense of lack of consideration cannot be raised against him
what if the accommodating, who was asked by the holder to pay for the instrument, paid the holder, can he ask reimbursement from the accommodate party?
yes. due to suretyship agreement
what is suretyship agreement?
the accommodation party is generally regarded as a surety for the accommodated party, the latter being the principal and.
in SA, the parties involved are the surety and the principal. the surety is liable to pay the monetary obligation of the debtor/principal if the latter refuses to pay his obligation.
the surety is primary liable with the principal.
the creditor may proceed directly against the surety or to his property in case of non-payment of the debtor or principal without exhausting or applying all the properties of the debtor/principal for the payment of his debt.
is the accomodation party primarily or secondarily liable?
it depends.
maker or acceptor-Party primary liable
drawer/indorser- secondary liable.
a paying accommodating party has always the right to ask reimbursement from the party accommodated, who is the real debtor
