R6: Comm Paper, Sec Trans, & Suretyship, Flashcards
Commercial paper types
Note/CD- 2 ppl
Check/Draft- 3 ppl
Negotiable Instrument
- written
- signed by maker/drawer
- unconditional promise to pay
- fixed amount
- magic words (except for checks)
- no addtl instructions
- on demand or definite time - must know latest date of pmt
authorized promises (addtl promises not ok except these)
auth to maintain collateral
auth to dispose of collateral
waive benefit of law (jury trial)
HDC requirements
- negotiable instrument
- took for VALUE (no excutory promises)
- in good faith
- w/o notice of claims (overdue)
types of endorsements
blank/special (for whom)
restrictive/unrestrictive (deposit only)
qualif/unqualif ( w/o recourse- cntc liab)
Shelter doctrine
if got from HDC you become HDC
even if not give value or if know of claims
Real Defenses (FAIDS)
Forgery Fraud in execution Adjudicated INSANITY Alteration of check Infancy Illegality Duress- that makes void, extreme Discharge in bankruptcy Surety defenses Stat of limits - 3 yrs from acceptance, 6yrs from demand/duedate
Primarily liable people on commercial papers
makers and drawees
drawees if accepted/signed/certified
—releases all others
secondarily liable people on comm papers
Drawer- second if bank not pay
endorser- if not endorse liab to next transferONLY
—if endorsed liab to ALL
—if w/o recourse- no contract liab just WTY LIAB
warranty liabs made by endorser
- entitled to enforce
- signatures are real
- not altered
- no defenses vs. transferor
- no knowl of insolvency
Discharging- release from obligation
- payment
- destroying instrument
- collateral released/impaired
- delay in presenting/ no notice of dishonor
- acc/certif by bank
PMSI
bought item from creditor OR
creditor gave$ to buy item
attachment reqs (vs. debtor)
- agreement
- —authenticated record OR possesion
- value given by creditor (loan)
- debtor has rights in collat (have it)
Perfection (vs other creditors)
- filing financing statement
- possessing
- control - secs- tell ppl to pay you instead
- autom perfection - ONLY consumer goods
- temporary - 20 day window for proceeds from orig collat and 4mths after moving interstate
Priorities
buyer in ord course PMSI perf sec int - first to file or perfect inperf sec int debtor
PMSI inventory
perfection BEFORE debtor possesess & give notice to other BEFORE debtor possesses
PMSI Equip
have 20 days AFTER debtor possession to perfect. if do it w/in it applies back to when debtor possessed
Jud lien vs. Sec int
jud lien priority if attached before sec int perfected
sec int if perfected before jud lien attached
trustee in bankruptcy priority
prior sec ints priority
subsequent sec ints NOT
Default Rights
- take possession
- sale - must give notice & wipes all sec ints
- proceeds from sale - first to pay exps, next creds, next debtor
retentiion of collateral (consumer vs. nonconsumer)
consumers- take it for full pmt
NONconsumers- take it and can recover diff from debtor
60% rule with consumers
if have paid 60% of balance you MUST sell
surety vs guarantor
surety just as liable. can recover from u instead
guarantor- has to use all other options first
compen vs noncompen surety
compen- only MAT change to risk releases him
NONcompen- ANY change to risk releases him
Surety rights vs. creditor
NO right to compel to use collat or go after debtor
no right to be notified of default
Surety rights vs. Debtor
Exoneration- BEFOREpmt- sue to go after debtor
Subrogation- AFTER- get creditors rghts
Reimbursement- AFTER- get $ from debtor
Surety rights vs. Cosureties
Exoneration- BEFORE- go after other cosureties so they pay their part
Contrib- AFTER- get their share
— ONLY SOLVENT ones count in prorata calc
Surety Defenses - if creditor is bad
Defrauded princ Duress on princ illegal discharge of obligation ---tender of pmt ---release of debtor ----covenant not to sue -------release of debtor w/ reserved rights vs. surety incapacity/bktpcy
Release of Cosuety
surety released from amount that cosurety couldve contributed
creditors composition vs. assignment of bens
composition- agmt bet creditors to take LESS for satisfaction of debt
assignment- give prop to trustee, he sells it and pays debts
Judlien vs. garnishments
Jud lien- used when asset in debtor’s hands
garnishments- 3rd pty’s hands
Fraud conveyances- characs:
- made to insider
- kept possesion/control
- NOT disclosed
- substantially ALL assets
- value rec’d NOT reas
- became insolvent afterwards
