SU #19.5

Question 1

Contractual Liability

Answer 1

Signers of a negotiable instrument, except qualified endorsers, have primary or secondary liability for its face amount, including interest (Endorsing a check makes the endorser contractually liable)

Question 2

An HDC takes negotiable instruments free from

Answer 2

Personal Defenses

Are subject to real defenses

Question 3

Real Defenses

Answer 3

1. Illegality rendering the obligation void
2. Fraud in the execution
3. Unauthorized signature
4. Fraudulent alteration
5. Extreme duress rendering the obligation void
6. Legal incapacity rendering the obligation void
7. Discharge in insolvency proceedings
8. Any other discharge of which the holder has notice
9. Minority or infancy to the extent it is a defense to a simple contract

Question 4

Personal Defenses

Answer 4

1. Fraud in the inducement
2. Unauthorized completion
3. Failure of a condition
4. Lack/failure of consideration
5. Theft of the instrument
6. Restrictive endorsement violated
7. Breach of contract or warranty
8. Other contract defenses
9. payment without obtaining surrender of the instrument

Question 5

Real Defenses

Answer 5

Defenses can bar collection from persons who would otherwise be primarily or secondarily liable on the instrument

Question 6

Fraud in the execution

Answer 6

It is against the signer, he or she is induced to sign without knowledge to learn of the true character and terms of the instrument.