REG 4 - R7 Commercial Paper and Bankruptcy Flashcards
Commercial Paper
Includes drafts and notes (installments)
Excludes:
-Documents of title (bill of lading and warehouse receipts (both governed by Article 7))
-Investment securities (corporate bonds, covered by Article 8)
Special Endorsement
Specifies the person to whom it is payable
Restrictive Endorsement
“For Collection”
Qualified Endorsement
“Without Recourse”
Type of HDC Defenses
HDC is subject to REAL defenses but not personal defenses
Instrument paid at a definite time
Only if the latest date of which payment can be made can be determined from the face of the instrument
Who has secondary liability?
A drawer of a draft Only liable after: -The draft is presented to the draftee -The draft is dishonored, and -The drawer is given notice of the dishonor.
Minority of the Maker (aka Infancy)
Fraud in beginning stages
Drawer (regarding a check)
The check writer
Drawee (regarding a check)
The bank whose routing number is on the bottom left of the check (drafts are presented to drawees for payment)
Holder
Someone in legal possession of the check
Maker
Someone who makes the promissory note.
The note is present to the maker for payment
Fraud in the Inducement
When one is promised value in exchange for an instrument and the promisor does not intend to and does not give that value. (NOT a valid defense against HDC)
10 Defenses against a Holder in Due Course
- Fraud in the execution
- Forgery
- Adjudicated insanity
- Material alteration
- Infancy
- Illegality
- Duress
- Discharge in bankruptcy
- Suretyship defenses
- Statute of limitations
Purchase Money Security Interest (PMSI)
A seller who sales goods on credit and retains a security interest in the goods to secure the purchase price has a PMSI.
-A PMSI in consumer goods is already perfected, no need to file
