NY Commercial Paper, Conflict of Laws, Secured Transactions Flashcards
Governing Law re Commercial Paper
THREE MAIN QUESTIONS
funky spelling
makers, drawers
order instrument
bearer instrument
Article 3 of UCC
THREE MAIN QUESTIONS: 1. negotiable instrument?, 2. HDC?, 3. Defense is real or personal?
indorse!
makers make notes (two party), drawers draw drafts (checks)
payable to specific person
payable to bearer
First Question: Is the writing in question a negotiable instrument?
REQUIREMENTS. KNOW THEM
There are six requirements (signed writing, unconditional, fixed amount, fixed/ascertainable person, fixed/ascertainable date, pure payor obligation):
- the document must be in WRITING and SIGNED by the maker or drawer
- promise or order must be UNCONDITIONAL
- payment obligation must be for FIXED amount
- writing must be payable to ORDER or to BEARER
- writing must be payable ON DEMAND or at a DEFINITE TIME
- writing must obligate the payor to pay money, and nothing else.
First Question: Is the writing in question a negotiable instrument?
bonus issues:
Re signed writing: (1) must be signed with “present intention to authenticate” (2) order of priority: handwritten>typewritten>printed
Re unconditional: NOT “subject to”, NO express conditions
Re sum certain: PRINCIPAL must be fixed, but INTEREST may vary by reference to something.
Re payable to order or to bearer: if both, then handwriting controls.
Re definite date: (1) acceleration clause can be okay, so long as DEFINITE (if giants lose then … ); (2) also HOLDER can extend.
Re Pure payment obligation. Additional payor promises prohibited! (I Mary promise to pay AND to bake pie). Sometimes okay if re additional collateral.
Second Question: Was the instrument properly negotiated?
Holder vs. Holder in Due Course:
basic idea
two steps
Becoming a holder
Negotiation
BASIC IDEA – The person who takes the instrument via NEGOTIATION will want to acquire status as a HOLDER IN DUE COURSE because this status gives him legal rights that are superior to those of a mere holder.
STEP ONE: Maker/Drawer ISSUES a NI to Payee/Holder
STEP TWO: Payee then TRANSFERS to Holder, who may be HDC depending on whether he meets requirements
Become a holder either through ISSUANCE or through NEGOTIATION.
Second Question: Was the instrument properly negotiated?
Negotiation
& types of indorsements
Bearer Instrument?
Just need transfer
Order instrument?
Negotiation= [ transfer of the NI ] + [indorsement]
- Special indorsement “Pay to Harry /s/ Paul.”
- Blank Indorsement: “/s/ Paul.”
- Qualified Indorsement: “Without Recourse /s/Paul”. LIMITS liability!
- Restrictive Indorsement: “For Deposit Only – /s/ Paul.” BUT cannot add condition. Restrictive indorsement is INVALID!
Multiple payees?
Payable Jointly - Requires all payees to indorse for a valid negotiation. (“to the order of Paul and Perry.”)
Payable Severally – EITHER party can sign the instrument to achieve a valid negotiation. (“to the order of Paul or Perry”)
Second Question: Was the instrument properly negotiated?
Requirements for becoming a Holder in Due Course
KEY!
One must: (1) take the instrument as a HOLDER, (2) for VALUE, (3) in GOOD FAITH, and (4) WITHOUT NOTICE of infirmities of the instrument.
re HOLDER: take by way of negotiation, see above
re VALUE: need consideration: (1) gift NOT okay, (2) if promise to perform, unless ACTUALLY performed!; (3) parital performance = partial rights, if you pay half now, half later, then you become HDC for half full value!
re GOOD FAITH: two part test: actually and reasonably thought the instrument was valid = honesty in fact + observance of reasonable commercial standards
re WITHOUT NOTICE: w/o notice that the NI was overdue, has been dishonored or that there is a defense! NOTICE = actual knowledge OR reason to know.
Question Four: Does the one obligated to pay have any defenses against Payment?
Shelter Rule
Distinguish between REAL DEFENSES and PERSONAL DEFENSES.
Real defenses are valid agaisnst Holder and HDC! Real defenses include: (1) Infancy, (2) Incapacity, (3) Duress if based on physical harm, (4) illegality, and (5) Fraud in the Factum, (6) bankruptcy, (7) SOL.
Personal defenses are available against the Holder but NOT the HDC! They include: All other valid defenses!
SHELTER RULE: Under the shelter rule, the transferor’s rights are passed to the transferee. EVEN IF GIFT!
OTHER:
PRESENTMENT WARRANTIES
TRANSFER WARRANTIES
Presentment Warranties – When a “person” presents an item for payment, the presentment comes with the following warranties:
Model answer, negotiable instrumetn?
The issue is whether a signed writing stating “IOU” is an enforceable negotiable instrument. In order to be an enforceable negotiable instrument under Article 3, the Uniform Commercial Code requires a writing be signed by the maker and contain an unconditional promise to pay a fixed amount to order or bearer that is payable on demand, or at a definite time and without requiring an additional undertaking or instruction. If there is no explicit time for payment, the instrument is presumed payable on demand.
The promise to pay must be more than simply an acknowledgment of an obligation. Thus, a simple “IOU,” which acknowledges an obligation and may constitute an enforceable obligation or promissory note, is not enough under to satisfy the requirements for negotiability; there must be an actual promise to pay. Therefore, the writing signed by Dan is insufficient for negotiability.a
Model answer. Drawee liable on fradulent check?
Generally, an unauthorized signature is ineffective as the signature of the person whose name is signed, and thus, a bank that pays out on an unauthorized check may be liable for reimbursing the customer. However, when the unauthorized signature is the result of an entrusted employee’s fraud, the liability rests with the customer-employer who entrusted the employee, rather than with the bank.
Here, Art hired Crane to be the bookkeeper, and entrusted Crane with the responsibility of issuing checks for his signature; between B Bank and Art, it is Art who is responsible for the losses incurred as a result of Crane’s fraud.
SOL reminders
o 10 years—Adverse possession o 6 years—Breach of contract o 4 years—Breach of warranty o 3 years—Negligence, strict liability, negligent infliction of emotional distress o 2.5 years—Medical malpractice o 2 years—Wrongful death o 1 year—Defamation, intentional torts
Preliminary Injunction Standard
The purpose of a PI is to maintain the status quo. To get a preliminary injunction, must demonstrate (1) irreparable harm (2) likelihood of success on the merits, and (3) no adequate remedy at law.
SJ Motion
Must be granted if there are no material and triable issues of fact presented
o Burden-shifting approach:
MTD
Procedural device for dismissing an action before the answer.
Standard for failure to state a claim: Taking all facts alleged as true and drawing all reasonable inferences for the plaintiff, whether plaintiff has stated a viable legal claim.
CONFLICTS (Torts)
Babcock, interests analysis.
Conduct regulating? apply law of place of injury!
Loss allocating? apply Neumeier Rules: (1) same domicile, (2) split domicile, accident in one; (3) split domicile accident elsewhere.
(i) Neumeier #1 – Same Domicile
(a) P and D have same domicile, apply LAW OF THAT DOMICILE; or
(b) If P and D are from different states, but on the issue both states have exactly same rules
(ii) Neumeier #2 – Split Domicile
Did the CONDUCT that caused the accident or injury that resulted occur in the state of domicile of one of the parties?
If yes, did that state’s law favor its domiciliary? – If so, apply that state’s law
(iii) Neumeier #3 – All Other Situations,
(a) NY presumptively applies the law of the place of the accident – rebuttable presumption
(b) Other situations:
3 states (P and D domiciled in 2 diff states and tort in a third state),
Tort actually touches both domicile states (D’s tortuous conduct occurred in his state, P’s injury occurred in her state)
(c) Overcoming presumption in favor of law of place of accident – where another state’s policies will be severely impaired if the law of the place of the accident is
