Negotiable Instruments

Question 1

Requirements

Answer 1

Under Michigan law, a negotiable instrument is an unconditional promise or order to pay a fixed amount of money if the following apply:

a) must be passable to bearer or to order at the time it is issued or first comes into possession of a holder,
b) must be payable on demand or at a definite time,
c) must not state any other undertaking by the person promising payment to do any act in addition to the payment of money,

An oral condition is ok because the condition is not on the face of the instrument

Question 2

Holder in Due Course

Answer 2

To establish a holder in due course status, one, just have taken the instrument for value, in good faith and without notice that the instrument contains unauthorized signature or that any party has a defense to payment on the instrument.

• Also when the instrument was negotiated to the holder, it does not bear apparent evidence of forgery to call into question its authenticity
• If one is a holder in due course, one takes the negotiable instrument free of any person defenses by the maker (but subject to real defenses such as duress)

Question 3

Bearer paper

Answer 3

Can be negotiated by transfer of possession along

Question 4

Order paper

Answer 4

Can be negotiated only by transfer plus an endorsement by the holder.

To be a holder of order paper:
-paper must be issued or properly endorsed to the person

Question 5

Payment in Full

Answer 5

Negotiable instrument can satisfy an obligation in full it it meets certain criteria:

1) instrument must conspicuously state the tender is in full payment
2) recipient of the check must obtain payment on the instrument
3) debt must be disputed or unliquidated, and
4) the person who tendered the instrument must have acted in good faith

Question 6

Action for Conversion

Answer 6

Required to prove:

1) that person in possession of the instruments before they were stolen
2) the terms of its instruments, and
3) that he was the named payee of the instruments