R7 - Commercial Paper Flashcards
Under the Negotiable Instruments Article of the UCC, which of the endorser’s liabilities are disclaimed by a “without recourse” endorsement?
Contract liability
To be a negotiable instrument:
It must meet all of the following:
Be in writing
Be signed by the maker or the drawer
Contain an unconditional promise or order
Be for a fixed amount of money
Be payable on demand or at a definite time
Be payable to order or bearer
Contain no additional undertaking/instruction not authorized by the UCC
If an instrument is endorsed to a specified person, it becomes ___________.
Order paper, but it still may be negotiated further, as long as the special payee endorses.
To be negotiable, a note must be payable in ______-
Money, and only money. A not that allows the maker to pay by performing services is not negotiable.
One will be a Holder in Due Course (HDC) if
He is a holder who takes the instrument for value, in good faith, and without notice that the instrument is overdue or has been dishonored or of any defenses on or claims to the instrument.
Signing without recourse
Negates contract liability on the instrument. Contract liability is the promise to pay upon dishonor.
Real defenses that may be asserted against both HDC and non-HDC transferees.
“FAIDS”
Fraud in the execution
Forgery
Adjudicated insanity, material Alteration
Infancy, Illegality
Duress, Discharge of bankruptcy
Suretyship defenses, Statute of limitations.
Striking a prior endorser
Discharges the endorser’s liability to all persons who take the instrument after the signature is stricken.
Commercial paper includes
Drafts and Notes
Draft is a
Three-party, order to pay
Negotiability requisites:
“Front only” of the instrument is looked at when determining negotiability. Nothing on the back can create or destroy negotiability.
