Commercial Paper: Transfers & Holders in Due Course Flashcards Preview

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Flashcards in Commercial Paper: Transfers & Holders in Due Course Deck (7)
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1

Negotiable Instruments:
Types of Endorsements

Blank
Special
Qualified
Restrictive

2

Negotiable Instruments:
Blank Endorsement

Blank Endorsement:
- do not specify new holder
- requires only delivery
- converts order to bearer
- transfer warranties extended to subsequent holders
- blank endorser has secondary liability to pay

3

Negotiable Instruments:
Special Endorsement

Special Endorsements:
- specify the new holder
- endorsement of first holder + new holder + delivery
- converts bearer to order
- transfer warranties extended to subsequent holders
- special endorser has secondary liability to pay

4

Negotiable Instruments:
Qualified Endorsement

Qualified Endorsement:
- includes terms "without recourse"
- disclaims contract signature (secondary party) liability
- transfer warranties extended to subsequent holders

5

Negotiable Instruments:
Restrictive Endorsement

Restrictive Endorsement:
Conditional: payment upon happening of an event
Prohibitive: prohibits further transfer of instrument (doesn't actually work)
For Deposit or Collection: makes endorsee (bank) a collection agent of the endorser
- does not prohibit further negotiation (except conditional restrictive endorsement)
- endorser has secondary liability to pay

6

Negotiable Instruments:
Holder in Due Course

Requirements:
1. Holder
2. Take for Value (actually paid/performed)
3. In Good Faith
4. Without Notice
- Overdue: time instrument past due date, demand instrument past reasonable time, check past 90 days
- Previously dishonored: must have actual knowledge
- Or any claim or defense: must have actual knowledge
- Irregularity
- Prior Notice: obligation is voidable or all discharged
- Close connection doctrine: history of problems

7

Negotiable Instruments:
Holder in Due Course
Shelter Rule

Shelter Rule:
- holder who cannot qualify as a HDC but took the instrument through a HDC has the same rights. i.e. gift
- cannot negotiate to HDC and then reclaim with new rights.

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