3. Transfer: Was it Properly Negotiated?

Question 1

What is negotiation?

Answer 1

a voluntary or involuntary transfer of possession of an instrument by a person other than the issuer to a person who thereby becomes its holder.

Question 2

What is an Order Instrument?

Answer 2

If an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and indorsement(signature) by the holder.

Question 3

Special order instrument

Answer 3

names specific person as indorsee

Question 4

Blank order instrument

Answer 4

no specified indorsee

Question 5

Qualified order instrument

Answer 5

limits liability on the instrument (“w/out recourse”)

Question 6

Restrictive Order Instrument

Answer 6

limits what holder can do (“for deposit only”)

Question 7

What is a Bearer Instrument?

Answer 7

A negotiable instrument is classified as bearer paper if it is payable to anyone who possesses it, meaning no specific individual or entity is named as the payee.

Question 8

Multiple Payees

Answer 8

Payable Jointly (“and”)-all payees must indorse

Payable Severally (“or”)-any one payee can indorse

Question 9

Other Payee Issues

Answer 9

Payee without capacity can indorse;

payee with misspelled name can indorse in real or misspelled name.