Ch 27 - Negotiation, Holder in Due Course, and Defenses

Question 1

blank unqualified endorsement

Answer 1

either the payee’s or the last endorsee’s signature; payable to whoever has possession of the instrument

Question 2

special unqualified endorsement

Answer 2

the endorser’s signature followed by a named endorsee, who then becomes the holder of the instrument

Question 3

blank qualified endorsement

Answer 3

either the payee’s or the last endorsee’s signature followed by without recourse

Question 4

special qualified endorsement

Answer 4

the endorser’s signature followed by a named endorsee and without recourse

Question 5

endorsement for deposit or collection only

Answer 5

restricts the instrument such that it must be collected by a bank for the endorser or for a particular amount (cannot be cashed)

Question 6

endorsement that prohibits further endorsement

Answer 6

restricts the payment to only the endorsee; doesn’t prevent further transfer but protects the endorsee from being liable on the instrument until the endorsee receives payment

Question 7

conditional endorsement

Answer 7

endorsement followed by a conditional statement that restricts payment; can be used as a defense for the endorser against the endorsee

Question 8

trust endorsement

Answer 8

allows the endorser to have the rights of a holder; used when the instrument is being transferred to a trustee for the benefit of the endorser

Question 9

4 requirements for holder in due course status

Answer 9

1. party must be a holder of a complete and authentic negotiable instrument
2. holder must take the instrument for value
3. holder must take the instrument in good faith
4. holder must take the instrument without notice of defects

Question 10

shelter principle

Answer 10

the transferee acquires all the rights the transferor had in the item upon transfer from one person to another