Nego of Instru

Question 1

What is negotiation?

Answer 1

The transfer of a negotiable instrument so that the transferee is now a holder.

Question 2

What is required for a party to have holder status?

Answer 2

1) They must be in possession of a negotiable instrument

2) They must have good title in the instrument

Question 3

How is good title determined for Order Paper?

Answer 3

The party must be in possession of the instrument and must have the necessary indorsement.

Question 4

How is good title determined for Bearer Paper?

Answer 4

Possession alone is sufficient for good title.

Question 5

What is an indorsement on an instrument?

Answer 5

Signature on negotiable instrument by someone other than the maker, drawer, or acceptor normally on the back of the instrument.

Question 6

What is a blank indorsement?

Answer 6

An indorsement of the payee’s signature - no person is now named as the payee on the instrument.

Question 7

What is the effect of a blank indorsement on order paper?

Answer 7

It creates bearer paper.

Question 8

What is the effect of creating bearer paper?

Answer 8

Any one who is in possession of the check now has the right to cash it.

Question 9

What is a special indorsement?

Answer 9

When the payee’s signature is on the document and the instrument includes a designation of a new party to whom the instrument is payable.

Question 10

What is the effect of a special indorsement on an instrument?

Answer 10

It creates order paper.

Question 11

What is the effect of creating order paper?

Answer 11

Future negotiations will requirement the indorsement of a person to whom it was made payable.

Question 12

What is created by a check paid to the order of X when X writes on the back “pay to S” and signs immediately below?

Answer 12

This is a special indorsement that results in order paper. Future transfers will require the signature of S.

Question 13

What is a restrictive indorsement?

Answer 13

An indorsement limiting what may be done with an instrument.

Question 14

What is created by “For Deposit Only” ?

Answer 14

Restrictive indorsement

Question 15

If there is an ambiguity regarding the initial payee who determines it?

Answer 15

Intent of the Issuer

Question 16

What is required if multiple payees are listed and there word “and” separates their names?

Answer 16

Requires all payees to indorse.

Question 17

What is required if multiple payees are listed and there word “or” separates their names?

Answer 17

Any one of the payees can indorse.

Question 18

If the instrument is transferred for value, what right does the transferee have?

Answer 18

Transferee has a right to a specifically enforceable right to the transferor’s indorsement.

Question 19

True or False: Depository bank becomes a holder even if payee deposits check in payee’s account without indorsing it.

Answer 19

True

Question 20

If payee’s name is misspelled can the payee indorse with incorrect or real name?

Answer 20

Either works

Question 21

Is Negotiation is effective even if the payee is a minor, incompetent, unduly influenced or subject to duress?

Answer 21

Yes