Transfer Flashcards
What does it mean to say that an instrument is “duly negotiated”?
Significance?
It means that there has been a proper transfer of the instrument
When an instrument has been properly transferred, the transferee is a HOLDER and may be eligible for the highly-coveted HOLDER IN DUE COURSE status.
When the instrument is payable to order of a specific payee, how is it negotiated (properly transferred)?
What is required for any further negotiation (subsequent transfers)?
By delivery of the instrument to that payee
The payee must have validly indorsed the instrument and delivered it to the transferee
If the instrument is payable to bearer, is indorsement required for subsequent transfers (i.e. from payee to transferee)?
No.
What is a special indorsement?
One that names a particular person a indorsee. This person must sign in order for the instrument to be further negotiated.
EX: B. Durnell indorses his paycheck, “Pay to H. Gamble, /s/ B. Durnell. Helen must indorse the check before it can be transferred.
What is a blank indorsement?
One that doesn’t name a specific indorsee, and thus may be negotiated by delivery alone.
EX: B. Durnell indorses his paycheck by signing the back and the delivers it to E., who loses it. J finds it and cashes it at a Grocery Store. This a valid transfer and thus the store is a holder.
What is a restrictive indorsement?
One that contains a condition.
EX: “For deposit only, /s/ B. Durnell.” Lucy steals the check an cashes it at a bank. The bank is NOT a holder because it didn’t heed the restriction.
