REG 13 - UCC Article 5 & 7 - Letters of Credit/Title Docs Flashcards
A seller and buyer enter into an international contract for the sale of goods involving a large amount of money. They agree to finance the sale by a letter of credit. Which of the following is correct?
A. Consideration will be required by the buyer for the issuance of the letter of credit.
B. A letter of credit can only be issued on a tangible form because a signature is required.
C. Domestic letters of credit are revocable, but, unless agreed, international letters of credit are irrevocable.
D. Letters of credit must have an expiration date and cannot be stated to be “perpetual.”
C. Domestic letters of credit are revocable and international letters of credit are irrevocable unless otherwise stated or agreed.
T/F: Consideration must be paid before a letter of credit can be issued.
False.
Consideration is not required for the issuance of a letter of credit.
T/F: Once a letter of credit, which appears on its face by standard practice to comply with the terms of the letter, is presented to the issuer, the issuer, to avoid liability, must honor the letter or give proper notice of defect within seven business days of presentment.
True
Under the Documents of Title Article of the UCC, which of the following terms must be contained in a warehouse receipt?
I. A statement indicating whether the goods received will be delivered to the bearer, to a specified person, or to a specified person or his/her order.
II. The location of the warehouse where the goods are stored.
Both I and II. a warehouse receipt to be effective as a title to goods held by a warehouse company, the warehouse receipt must contain the location of the warehouse where the goods are stored, and an indication to the warehouse company whether the goods are to be delivered to any holder (a bearer document), a specified person (consignee) or his/her order (an order document), or a specified person (a nonnegotiable document). Generally also required are date and issue number, signature of the warehouse manager and if owner, rates, and description of the goods.
Burke stole several negotiable warehouse receipts from Grove Co. The receipts were deliverable to Grove’s order. Burke endorsed Grove’s name and sold the warehouse receipts to Federated Wholesalers, a bona fide purchaser.
In an action by Federated against Grove,
A. Grove will prevail, because Burke cannot validly negotiate the warehouse receipts.
B. Grove will prevail, because the warehouser must be notified before any valid negotiation of a warehouse receipt is effective.
C. Federated will prevail, because the warehouse receipts were converted to bearer instruments by Burke’s endorsement.
D. Federated will prevail, because it took the negotiable warehouse receipts as a bona fide purchaser for value.
A. To properly negotiate a negotiable document, the receipts must be signed by Grove.
Grove’s indorsements have been forged. Grove may assert the universal defense of forgery against anyone, even a holder in due course or a bona fide purchaser.
Under the Documents of Title Article of the UCC, which of the following statements is(are) correct regarding a common carrier’s duty to deliver goods subject to a negotiable, bearer bill of lading?
I. The carrier may deliver the goods to any party designated by the holder of the bill of lading.
II. A carrier who, without court order, delivers goods to a party claiming the goods under a missing negotiable bill of lading is liable to any person injured by the misdelivery.
Both I and II. Because, if the bill of lading is a bearer document, the carrier can deliver the goods to any holder of the document or to any person whom the holder designates to receive the goods. The holder, however, must surrender the document to the carrier. If the bill of lading is negotiable and the document is not surrendered, in this case it is missing, the carrier is liable for any misdelivery (to someone other than the legal holder of the document) to any person injured thereby.
Which of the following statements is correct concerning a bill of lading in the possession of Major Corp. that was issued by a common carrier and provides that the goods are to be delivered “to bearer”?
A. The carrier’s lien for any unpaid shipping charges does not entitle it to sell the goods to enforce the lien.
B. The carrier will not be liable for delivering the goods to a person other than Major.
C. The carrier may require Major to endorse the bill of lading prior to delivering the goods.
D. The bill of lading can be negotiated by Major by delivery alone and without endorsement.
D. A document of title such as a bill of lading that is marked “to bearer” may be used by any rightful holder who comes into possession of it. It may be negotiated, or transferred, to another by delivery alone because any rightful holder is entitled to use it to receive the goods. Major’s endorsement, or signature, is not needed because the rights are not specific to him.
T/F: ABC, a warehouse company, has issued to Fraser a negotiable bearer warehouse receipt. Fraser had obtained the goods by fraud from Sallor. Fraser transfers the warehouse receipt without indorsement to Beyer, who gives Fraser value and takes the warehouse receipt in good faith, without knowledge of the fraud, and in Beyer’s ordinary course of business. As between Sallor and Beyer, Beyer is entitled to the goods held by ABC.
True
T/F: The requirements for a negotiable bill of lading are the same as the requirements for a negotiable instrument.
False.
A holder in due course has the same requirements, except for a duly negotiated document of title is performed in the ordinary course of business.
T/F: A holder through due negotiation of a negotiable bill of lading has priority over the consignor of the goods.
True
T/F: A nonnegotiable document can be transferred by due negotiation if the holder takes the document in good faith, without notice of claim or defense, for value, and in the ordinary course of business.
False.
No, if the document is not negotiable, there will be no transfer as they will not have any title or rights to the good.s
T/F: ABC, a public carrier, issues to Green a negotiable order bill of lading. Green loses the bill of lading and it is found by Crook. In indorsing the bill of lading, Crook forges Green’s signature and sells the bill of lading to Beyer, who knows nothing of the fraud in taking the bill in Beyer’s ordinary course of business. Because the bill of lading has been duly negotiated to Beyer, as between Green and Beyer, Beyer is entitled to the goods.
False.
Forgery of the document or any indorsement defeats rights of any holder to either the document or the goods.
