Chapter 7 Bus Law: Commercial Paper, Secured Transactions, Flashcards
Under negotiable instruments UCC (article 3), what makes an instrument negotiable?
Be in writing
Be signed by the maker or drawer (not drawee)
Contain an unconditional promise or order
Be for a fixed amount of money
Be payable on demand or at a definite time
Be payable to order or bearer
Contain no additional undertaking/instruction not authorized by the UCC
what notes are subject to Article 3 of UCC?
Checks, Drafts, promissory notes, CoD
what instruments are subject to Article 7 of UCC?
Bill of lading
Warehouse reciept
what determines whether an instrument can be further negotiated?
depends on to whom the instrument was drawn in the first place. If the instrument here was payable to bearer or to the order of Faye Smith, it may be further negotiated, but if it was payable to the order of anyone else, it could not be further negotiated without that person’s endorsement.
what is an Order paper (Draft)?
Is three party paper. Where a signer orders a bank (person with money) to pay a third person
Person A ORDERS Person B to PAY person C
What makes a Holder in Due Course
- negotiable note
- negotiable note PAYABLE TO ORDER
- transferee’s can be hdc
- he is a holder who takes the instrument for value, in good faith, and without notice that the instrument is overdue or has been dishonored or of any defenses on or claims to the instrument
Real vs personal defenses
Real: 10 FAIDS F - Fraud in execution OR Forgery A - Adjudicated insanity OR Material Alterations I - Infancy OR Illegality D - Duress OR Discharge for Bankruptcy S - Suretyship (Someone will pay for you) OR Statute of Limitations (3 years after dishonor, 6 years after demand) Personal: (All NOT FAIDS defences) Breach of Contracts
Endorsement (SPecial vs Restricted vs Qualified vs Blank)
Restricted = "For COllection" SPecial = Names NEW Payee Blank = DOES NOT NAME New Payee Qualified = Contains words "Without recourse" eliminating contract liability
what is necessary for a security interest to attach? (A(CCC)-DR-CV)
A(CCC) - Parties make AUTHORIZED AGREEMENT to create security interest OR CREDITOR CONTROLS COLLATERAL
DR - DEBTOR must have RIGHTS in the collateral
CV - CREDITOR Must give VALUE
What is Purchase Money Security Interests (PMSI)?
Have priority over every other type of Security interest in that piece of collateral
What is scope of Article 9 (Secured Transactions) of UCC?
Personal property or fixtures (or AR sales) ONLY
Who gets PMSI?
1) Creditor selling collateral on credit (Kia selling me car on credit)
2) Creditor advances funds used by debtor to purchase collateral (If Bank of America gave me money to buy Sophia)
How to spot PMSI in problems?
Did the debtor purchase the collateral with creditor’s money or creditor’s credit? Was it perfected within 20 days of debtor recieving goods
When multiple security interests in the same collateral who gets top priority?
The person who filed or perfected first. EXCEPT PMSI HAS PRIORITY OVER NONINVENTORY GOODS
Perfection of AR?
Only automatic when not a substantial amount of AR has been assigned.
