UCC 3 Commercial Paper Flashcards
Negotiable Instrument
- 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
Holder in Due Course
Takes free of personal defenses and subject only to real defenses
- Takes for value
- In good faith
- W/o notice of claims for defenses
Note
- 2 party instrument
2. Where maker promised to pay
Draft
- 3 party instrument
- Drawer orders 2nd party to pay 3rd party
I.e. Check
Check
A draft drawn upon a bank and payable on demand
Requirements to be Negotiable
- Writing
- Unconditional promise
- Fixed amount of money
- Payable to bearer at 1st possession
- Payable on demand/definite time
- Contains NO additional undertakings
Payable to Order
Payable to specific payee, must be delivered, further negotiation requires signatures
Payable to Bearer
Indorsement not required, further negotiation OK by possession alone
Types of Indorsements
- Special
- Blank
- Restrictive
Special Indorsement
Named specific person as indorsee who must sign
Blank Indorsement
Only has payee signature, no specific person named on instrument
Restrictive Indorsement
Contains a condition
Identification of Payee
If exact payee is unknown INTENT of issuer controls
Multiple payees
ALL must indorse if it says “and”
ONE may indorse if it says “or”
Misspelled name
Payee may indorse with real or incorrect name
Payee lacks capacity
May still indorse
When is HDC entitled to enforce instrument?
- Is overdue/dishonored
- Contains unauthorized signatures
- Has a defense claim
Shelter Doctrine
Protects HDC who receives an instrument from a HDC also giving them HDC status
Signature by Agents
Not personally liable unless IDed in instrument, clearly shows made on behalf of principal
