Liability of Parties

Question 1

Maker’s liability to holder

Answer 1

primary liability to holder

Question 2

Drawer’s liability to holder

Answer 2

Secondary liability to holder (only after drawee refuses to pay)

Unless drawee signs instrument, then drawer’s liability is discharged

Question 3

Drawee’s liability to holder

Answer 3

None (unless drawee signs instrument, then primary)

Question 4

Acceptor’s liability to holder

Answer 4

Primary liability to holder, acceptance discharges drawer and indorsers

Question 5

Indorser’s liability to holder

Answer 5

secondary liability to holder

requires notice of dishonor

Question 6

Accommodation party’s liability to holder

Answer 6

liable in the capacity in which they signed

Question 7

Who makes transfer warranties?
Who are they made to?

Answer 7

Any transferor who recieves consideration makes transfer warranties to:
* immediate transferee
* all subsequent transferees by indorsement
* all subsequent banks without indorsement

(not drawees and makers)

Question 8

Transfer Warranties

Answer 8

• entitled to enforce instrument
• signatures are authentic and authorized
• no alteration
• no defenses are good against the transferor
• no knowledge of insovency proceedings

Question 9

Who makes presentment warranties?
Who are they made to?

Answer 9

Presenter and previous transferors make presentment warranties to all parties who pay in good faith:
* maker
* drawee
* acceptor

Question 10

Presentment warranties of an unaccepted draft

Answer 10

• entitled to enforce instrument
• no knowledge that drawer’s signature is unauthorized
• no alteration