Due Negotiation: how is a negotiable instrument properly transferred?

Question 1

Payable to order

Answer 1

When the instrument is payable to the order of a specific payee, it is negotiated by delivery of that instrument to the payee.

Question 2

Significance of due negotiation

Answer 2

Due negotiation means that there has been a proper transfer of the instrument. If the instrument has been properly transferred, the transferree is a holder and may be eligible to be a holder in due course.

Question 3

Payable to order with transfer from payee to transferee

Answer 3

Any further negotiation requires that the payee indorse the instrument and deliver it to transferee.

Indorsement must be authorized and valid.

Question 4

Payable to bearer

Answer 4

If the instrument is payable to bearer, indorsement is not required

Question 5

Types of indorsements

Answer 5

Special or blank and restrictive or unrestrictive.

Question 6

Special indorsements

Answer 6

Names a particular person as “indorsee.” Indorsee must sign in order for the instrument to be further negotiated.

Question 7

Blank indorsements

Answer 7

Does not name a specific indorsee.

It may be negotiated by delivery alone.

Question 8

Restrictive indorsement

Answer 8

contains a restriction.

ex- “for deposit only”