Transfer of an instrument

Question 1

What is the Shelter Rule ?

Answer 1

The rights the transferor transfers to the transferee (ex: If B is HDC transfers to C, C is not an HDC but has the rights of a HDC via shelter rule)

Question 2

When a Transferee pays value for an instrument and the transferor fails to provide a necessary indorsement……

Answer 2

The Transferee has the legal right to have the transferor provide the necessary endorsement to complete the negotiation.

Question 3

A transferee who commits fraud or otherwise engages in illegal activity cannot acquire rights as a

Answer 3

HDC. However, a later transferee who knows about the fraud still takes as a HDC though

Question 4

What are the 6 transfer warranties

Answer 4

1. The warrantor is a person entitled to enforce the instrument
2. All signatures on the instrument are authentic and authorized
3. The instrument has not been altered
4. There are no defenses that can be asserted against the transferor
5. Warrantor has no knowledge of any insolvency proceedings

6 .With respect to any remotely created consumer check, the person on whose account the check is drawn has authorized the issuance of the item in the amount for which the check is drawn

Question 5

A special endorsement using the words “only”

Answer 5

Is generally ineffective as a limitation as an restriction