REG mod28b

Question 1

How is order paper transferred between parties?

Answer 1

By delivery and endorsement.

Question 2

Describe a special endorsement.

Answer 2

This is a signature on the back of an instrument and additional writing that names a new payee. The instrument, once it has a special endorsement, is considered to be order paper.

Question 3

What type of defense may be used successfully against a Holder in Due Course?

Answer 3

Real defenses, such as forgery, bankruptcy, fraud in the execution, material alteration of the instrument, etc.

Question 4

When is a draft payable?

Answer 4

Drafts are payable on a specific future date.

Question 5

Name the three parties of a draft.

Answer 5

Drawer (writes the check)
Payee (check payable to)
Drawee (ex: the bank)

Question 6

How is bearer paper negotiated?

Answer 6

Bearer paper is negotiated by delivery.

Question 7

Who is secondarily liable if the drawee fails to pay on a draft?

Answer 7

The drawer

Question 8

‘Without recourse’ is what kind of endorsement?

Answer 8

A qualified endorsement.

Question 9

Describe a blank endorsement.

Answer 9

This is the signature on the back of an instrument. This turns the instrument into bearer paper.

Question 10

Name the two parties of a promissory note.

Answer 10

Maker & Payee

Question 11

“Which phrase destroys negotiability?
“Pay to the order of Company A”
“Pay Company A””

Answer 11

“Pay Company A” destroys negotiability. In order to have a negotiable instrument it must state ‘Pay to the order of….’.