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Flashcards in Commercial Paper Deck (22)
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1

Negotiable Instrument

1. Writing
2. Signed by maker/drawer
3. Payable to order/bearer (words of negotiability)
4. Unconditional promise
5. Sum certain
6. On demand or definite time
7. No additional undertakings

2

Failures of "unconditional promise"

1. payment conditional on x
2. payment subject to another K
3. payment "must" come from particular fund

3

Variable interest rates = sum certain?

OK if readily attainable by state or generally accepted index

4

Order instrument

Payable to a specific person

5

Bearer instrument

Anyone in possession has legal rights to the instrument

6

Valid order instrument language

"Words of negotiability"
- to the order of ____
- to ____ or his order

7

Valid bearer instrument language

- Payable to bearer
- Payable to the order of bearer
- Payable to cash
- Payable to _____

8

Methods of taking NI as a holder

1. Issuance
2. Negotiation

9

Valid negotiation of order instrument

1. Transfer of possession
2. Endorsement

10

HDC

1. Value given
2. Good faith
3. W/o notice

11

HDC - value

Give, do, or forgive

12

Good faith inquiry

1. Honesty in fact
2. Observance of reasonable commercial standards ("things that make you go hmmmm")

13

Notice

re: overdue, dishonered, defenses against payment

14

Defenses against HDC

Real defenses only

15

Defenses against holder

Real & Personal defenses

16

Real defenses

1. Infancy (necessities exception)
2. Adjudicated Incapacity
3. Immediate physical Duress
4. Illegality
5. Fraud in factum
6. Bankruptcy
7. SOL (6 years)

17

Personal defenses

1. All valid claims to the instrument
2. All valid defenses available under K law
3. Nondelivery or delivery for special purpose
4. Theft

18

Shelter Rule

Transferee has whatever rights transferor had

19

Payees usually not HDCs

.

20

Presentment warranties

1. Good title
2. No knowledge of unauthorized signatures
3. Not materially altered

21

Agent liability

1. Lacked authority
2. Sign w/o indication of representative capacity
3. Sign w/o referencing principal

22

Principal liability

1. Free if A signed w/o authority
2. Ratifies A's unauthorized signature
3. Estopped if negligently contributed to A's unauthorized signature
4. Names principal + shows A's signature on his behalf