Commercial paper

Question 1

Does stopping payment on a check release obligation to pay check/fulfil payment?

Answer 1

No

Question 2

To actually halt payment, what does individual need to do?

Answer 2

establish defense against HDC or real personal defense against non-holder

Question 3

Real defenses

Answer 3

Fraud, void, infancy, deception

Question 4

What kind of defenses can be used against HDC

Answer 4

Real defenses

Question 5

Negotiable instrument (7)

Answer 5

1. Writing
2. Signed by the maker/drawer
3. Unconditional promise or oder
4. To pay a fixed amount of money
5. To order (specific person) or bearer (i.e. whoever bears the instrument)
6. Payable on demand or at fixed time
7. Without additional undertaking or instruction

Question 6

Acceleration clause

Answer 6

Accelerates time of payment

Question 7

Does acceleration clause destroy negotiability?

Answer 7

no

Question 8

If instrument is payable in foreign currency, still negotiable?

Answer 8

Yes

Question 9

WHen is interest due in negotiable instruments?

Answer 9

If instrument provides for interest paymetn

Question 10

Still negotiable if instrument doesn’t specific interest rate?

Answer 10

Yes, court will imply the interest rate.

Question 11

Check is an?

Answer 11

Order instrument

Question 12

Does check require endorsement by holder for transfer to subsequent party for negotiation?

Answer 12

Yes

Question 13

What if transferee receives an unendorsed check? Still a holder?

Answer 13

No

Question 14

What can transferee do if she receives an unendorsed check?

Answer 14

Enforceable right to get the check endorsed by transferor

Question 15

What is restrictive endorsement?

Answer 15

“Pay to J only”

I.e. limiting payment to particular person or otherwise prohibiting further transfer negotiation

Question 16

Is restrictive endorsement actually effective in preventing further transfer negotiation?

Answer 16

No

Question 17

If words and numbers contradict each other in instrument, which one prevails?

Answer 17

Words

Question 18

If handwriting of interest rate is illegible, what happens?

Answer 18

default rate applies. I.e. the judgment rate.

Question 19

If you sue to get payment of a note, can you get attorneys fees?

Answer 19

Only if provided for in instrument

Question 20

Can party be held liable on negotiable instrument?

Answer 20

Only if it bears that party’s signature or signature of an authorized agent (actual or apparent)

Question 21

Doctrine of necessaries

Answer 21

Parents are legally responsible for children’s necessary expenses, incl. medical bills, even if parents didn’t sign agreement or note for those expenses

Question 22

Ratification

Answer 22

principal knowingly adopts signature as her own/fails to deny validity of unauthorized signature

Question 23

grantor =

Answer 23

person who commits to paying someone’s debt in case of default

Question 24

Accommodating party =

Answer 24

Someone who takes on someone else’s liability without getting benefit of value given.

Discharged from obligation if impaired collateral (i.e. secured party failed to perfect interest)

I.e. someone who guarantees a promissory note.

Question 25

Drawer's obligation:

Answer 25

To pay according to terms issued

Question 26

Check =

Answer 26

Order instrument

Question 27

What does check require to negotiate:

Answer 27

Transfer and endorsement

Question 28

HDC

Answer 28

Party who takes: 1. for value 2. in good faith 3. No notice of defects (e.g. dishonoured)

Question 29

Holder is only subject to

Answer 29

Contract defenses

Question 30

If negotiable instrument issued without consideration:

Answer 30

Drawer has a lack of consideration defense

Question 31

Shelter rule

Answer 31

If receiving check from HDC, you get the rights of the HDC unless you took based on fraud

Question 32

Under K theory, collector has right to recover from: (4)

Answer 32

1. Maker of the check 2. Payee 3. Bank 4. First holder

Question 33

What happens if bank cashes forged check?

Answer 33

Account holder can hold bank liable. Bank can only cash properly payable checks, not foregd ones. Plaintiff needs to report unauthorized signature as soon as they notice it to get bank to recredit the money.

Question 34

Presentment warranty to bank

Answer 34

Assurance that check is genuine Legal authority to enforce the check No knowledge of any unauthorized signatures or alterations on the check

Question 35

Presentment warranty to person who originally issued the check

Answer 35

Check is genuine Entitled to enforce it No knowledge of unauthrozied signautres of alterations Same as presentment warranty to bank!!

Question 36

Bank cannot recover back from HDC unless

Answer 36

breach of presentment warranty

Question 37

What happens when bank pays even after stop payment order?

Answer 37

Plaintiff can get damages, unless receiver of stop payment order was HDC

Question 38

If HDC, can you assert defense of lack of consideration?

Answer 38

No