Transfer & Negotiation Flashcards
What is NEGOTIATION? (Sec. 191)
It is the transfer of the instrument from one person to another so as to constitute the transferee as the holder thereof.
What is issuance?
The first delivery of the instrument complete in form to a person who takes it as a holder.
What is DELIVERY? (Sec 191)
It is the transfer of possession, actual or constructive, from one person to another with the intent to transfer the title thereto.
What is the effect of a transfer without indorsement/ INCOMPLETE NEGOTIATION OF ORDER INSTRUMENT?
Where the holder of an instrument payable to his order transfers it for value without indorsing it,
the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferor.
But for the purpose of determining whether the transferee is a holder in due course, negotiation takes effect as to the time when the indorsement is actually made.
- subject to defense available to prior parties
- *no presumption of consideration
What is INDORSEMENT? (Sec. 31)
It is the writing of the name of the indorser on the instrument with intent of either to:
1) transfer the title to the same; or
2) to strengthen the security of the holder by assuming a contingent liability for its future payment.
How is Indorsement made? (Sec.31)
The indorsement must be written on the instrument itself or the upon a paper attached thereto. The signature of the indorser without additional words, is a sufficient indorsement.
*completed by delivery
What is a SPECIAL INDORSEMENT? INDORSEMENT IN BLANK? (Sec. 34)
A SPECIAL INDORSEMENT specifies the person to whom, or to whose order, the instrument is to be payable; and the indorsement of such indorsee is necessary to the further negotiation of the instrument.
AN INDORSEMENT IN BLANK specifies no indorsee, and an instrument so indorsed is payable to bearer, and may be negotiated by delivery.
What is a QUALIFIED INDORSEMENT? (Sec. 38)
A QUALIFIED INDORSEMENT constitutes the indorser as mere assignor of the title of the instrument.
It may be made by adding to the indorser’s signature the words “without recourse” or any words of similar import.
Such an indorsement does not impair the negotiable character of the instrument.
What is a CONDITIONAL INDORSEMENT?
One by which the indorser adds some other conditions to his liability;
Sec. 39
Where an indorsement is conditional, a party required to pay the instrument may disregard the condition and make payment to the indorsee or his transferee whether the conditions has been fulfilled or not. But any person to whom an instrument so indorsed or negotiated, will hold the same, or the proceed thereof, subject to the rights of the person indorsing conditionally.
When is an indorsement RESTRICTIVE? (Sec. 36)
An indorsement is restrictive which either —
1) Prohibits the further negotiation of the instrument; or
2) Constitutes the indorsee the agent of the indorser; or
3) Vests the title in the indorsee in trust for or to use of some other person.
But the mere absence of words implying power to negotiate does not make an indorsement restrictive.
What is the effect of RESTRICTIVE INDORSEMENT? (Sec. 37)
A restrictive indorsement confers upon the indorsee the right—
1) To receive payment of the instrument;
2) To bring any action thereon that the indorser could bring;
3) To transfer his right as such indorsee, where the form of the indorsement authorizes him to do so.
But all subsequent indorsee acquire only the title of the first indorsee under the restrictive indorsement.
Rights of a PRIOR PARTY? (Sec. 50)
Where an instrument is negotiated back to a prior party, such party may, subject to the provisions of this Act, reissue and further negotiate the same.
But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable.
Limitations on renegotiation by a prior party
1) Where it is payable to the order of a third person, and has been paid by a drawer (Sec. 121 [a]);
2) Where it was made or accepted for accommodation and has been paid by the party accommodated (121 [b]);
3) In other cases, where the instrument is discharged when acquired by a prior party (119).
Striking out indorsement? When? Effect? (Sec. 48)
The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.
Consideration? (Ty v. People)
Valuable consideration consist either of rights, interest, profit, or benefit accruing to the party who makes the contract or…
Some forebearance, detriment, loss, or some responsibility to act, or labor, or service given, sufferred or undertaken by the other party.
