REG - 11

Question 1

What must a transferee of order paper have to become a holder?

Answer 1

1. Possession

2. Endorsement of transferor

Question 2

What would prevent a person from becoming a holder in due course?

Answer 2

Only notice of the following:

• the instrument is overdue
• has been previously dishonored
• contains forgery OR
• a claim of or defense to payment exists

Question 3

What is an endorsement “without recourse?”

Answer 3

It is a qualified endorsement, which does not contractually guaranty payment (disclaimer contract liability).

Question 4

What does the qualified endorsement make warranties to:

Answer 4

• Good title
• Signatures are genuine
  etc.

Question 5

What effect does a blank endorsement have?

Answer 5

The instrument becomes a bearer instrument and can be transferred by mere delivery.

Question 6

Qualified Indorsement

Answer 6

One that limits the warranties that the transferor of the instrument gives. This is “without recourse” endorsement, an endorsement that eliminates one of the five transferor warranties.

A qualified endorsement does not contractually guaranty payment (disclaims contract liability). The qualified endorsement only makes warranties as to good title, signatures are genuine, etc.

Question 7

What kind of endorsement is “FOR DEPOSIT ONLY”?

Answer 7

Restrictive

Question 8

What is required to be a holder in due course?

Answer 8

• holder must take the instrument for value
• take the instrument in good faith
• take the instrument without notice the instrument is overdue or has been previously dishonored or of any claim of defense

Question 9

Only notice of the following will prevent a person from becoming an HDC

Answer 9

the instrument is overdue, has been previously dishonored, the instrument contains forgery, or claim or defense to payment exists

Question 10

How much time do non-bank parties have to turn to secondary parties after the primary party refuses to pay?

Answer 10

30 days.