Special Deck - Commercial Paper

Question 1

What does the acronym COUPON stand for?

Answer 1

It establishes the negotiability of an instrument

Certain sum of money

Order or bearer

Unconditional promise to pay

Payment in money

ON demand or a specific time

Signed by creator of instrument

Question 2

What does FABLE stand for?

Answer 2

List of real defenses in commercial paper

Forgery

Alteration

Bankruptcy discharge

Lack of capacity (infancy?)

Extreme duress/Execution fraud

Question 3

Which must be payable on demand, check or draft?

Answer 3

Check. Draft can also be made out to bearer.

Question 4

What is the difference between a draft and a note?

Answer 4

Notes are 2 party, drafts are 3 party.

Question 5

What defines a Holder in Due Course?

Answer 5

Gives value for instrument

In good faith

Without knowledge of defect of instrument

Question 6

List all 6 real defenses with acronym FABLE

Answer 6

Forgery

Alteration

Bankruptcy discharge

Lack of capacity (infancy)

Extreme duress/Execution fraud

Question 7

List personal defenses through acronym BUILD

Answer 7

Breach of contract

Unauthorized completion

Inducement of fraud

Lack of capacity

Duress

Question 8

What is difference between real and personal defenses?

Answer 8

Personal defenses-creator of instrument was wronged

Real - something wrong with paper itself

Question 9

What personal defense can the real defense of Alteration be confused with?

Answer 9

Unauthorized completion

Question 10

Can you be a holder in due course of an unnegotiable instrument?

Answer 10

No

Question 11

Name and define the 4 types of endorsements

Answer 11

1. Special - Pay to:
2. Endorser signs without naming next payee-bearer paper
3. Qualified - without recourse
4. Restrictive - “for deposit only”

Question 12

Define Special endorsement

Answer 12

Endorser name next payee, paper now order paper and requires signature to negotiate further

Question 13

Define Blank endorsement

Answer 13

Endorser signs without naming next payee-becomes bearer paper

Question 14

Define Qualified endorsement

Answer 14

Endorser writes “without recourse”- eliminates contract and signature liability

Question 15

Define Restrictive endorsement

Answer 15

Endorser writes conditions on transfer- for example, “for deposit only”

Question 16

Define a holder in due course

Answer 16

1.) He gives value for instrument, 2.) Takes instrument in good faith, 3.) without notice of defect in instrument

Question 17

List the personal defenses, acronym BUILD

Answer 17

Breach of Contract, Unauthorized completion, Inducement of fraud, Lack of consideration, Duress

Question 18

List the 5 Real defenses, acronym FABLE

Answer 18

Forgery, Alteration, Bankruptcy discharge, Lack of consideration, Execution fraud (EXTREME DURESS)