UCC 3 Commercial Paper

Question 1

Negotiable Instrument

Answer 1

1. Written 2. Signed 3. Unconditional promise to pay 4. To order or bearer 5. A fixed sum of money on demand or at a definite time 6. Which states no unauthorized undertakings

Question 2

Holder in Due Course

Answer 2

Takes free of personal defenses and subject only to real defenses

1. Takes for value
2. In good faith
3. W/o notice of claims for defenses

Question 3

Note

Answer 3

1. 2 party instrument

2. Where maker promised to pay

Question 4

Draft

Answer 4

1. 3 party instrument
2. Drawer orders 2nd party to pay 3rd party
   I.e. Check

Question 5

Check

Answer 5

A draft drawn upon a bank and payable on demand

Question 6

Requirements to be Negotiable

Answer 6

1. Writing
2. Unconditional promise
3. Fixed amount of money
4. Payable to bearer at 1st possession
5. Payable on demand/definite time
6. Contains NO additional undertakings

Question 7

Payable to Order

Answer 7

Payable to specific payee, must be delivered, further negotiation requires signatures

Question 8

Payable to Bearer

Answer 8

Indorsement not required, further negotiation OK by possession alone

Question 9

Types of Indorsements

Answer 9

1. Special
2. Blank
3. Restrictive

Question 10

Special Indorsement

Answer 10

Named specific person as indorsee who must sign

Question 11

Blank Indorsement

Answer 11

Only has payee signature, no specific person named on instrument

Question 12

Restrictive Indorsement

Answer 12

Contains a condition

Question 13

Identification of Payee

Answer 13

If exact payee is unknown INTENT of issuer controls

Question 14

Multiple payees

Answer 14

ALL must indorse if it says “and”

ONE may indorse if it says “or”

Question 15

Misspelled name

Answer 15

Payee may indorse with real or incorrect name

Question 16

Payee lacks capacity

Answer 16

May still indorse

Question 17

When is HDC entitled to enforce instrument?

Answer 17

1. Is overdue/dishonored
2. Contains unauthorized signatures
3. Has a defense claim

Question 18

Shelter Doctrine

Answer 18

Protects HDC who receives an instrument from a HDC also giving them HDC status

Question 19

Signature by Agents

Answer 19

Not personally liable unless IDed in instrument, clearly shows made on behalf of principal