Contracts - UCC Art 3 - Liabilities & Discharge of Duties Flashcards Preview

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Flashcards in Contracts - UCC Art 3 - Liabilities & Discharge of Duties Deck (14):
1

Who are the secondary parties to an instrument?

1.Payees;
2.Drawers;
3.Indorsers.

2

Define "fraud in factum".

Fraud in factum occurs when a party is deceived into signing something that he does not know is a contract. Fraud in factum is used interchangeable with fraud in execution.

3

Who are the primary parties to an instrument?

1.Makers;
2.Drawees.

4

List the presentment warranties associated with negotiable instruments.

1.Person presented is authorized to receive payment;
2.The instrument has not been altered;
3.Person has no knowledge instrument is unauthorized.

5

Who is liable for an imposter payee?

The drawer has liability.

6

When an authorized agent signs on behalf of a principal, who is liable for the instrument?

An authorized agent can bind his principal on an instrument by signing the instrument in such a way as to clearly show that he is signing on behalf of the principal. In such a case, the principal, rather than the agent, will be liable on the instrument.

7

List the three personal defenses against liability on negotiable instruments.

1.Breach of contract;
2.Failure of consideration;
3.Fraud in the inducement.

8

What is the effect of material alteration on an instrument?

Discharges obligation of payment to either holder and holder in due course (HDC). If maker or drawer was sloppy in creating instrument and allowed alteration, obligation of payment according to original terms remains to HDC.

9

List the real or universal defenses available for not honoring an instrument.

1.Forgery;
2.Fraud in execution or fraud in factum;
3.Minority;
4.Discharge in bankruptcy;
5.Illegality;
6.Mental incapacity;
7.Duress (to the extent conduct is illegal).

10

List the two forms of negotiable instrument liability.

1.Contract (signature liability);
2.Warranty liability.

11

List the transferor warranties associated with negotiable instruments.

1.Transferor is entitled to enforce the instrument;
2.All signatures are genuine or authorized;
3.Instrument has not been altered;
4.Instrument not subject to defenses;
5.Transferor has no knowledge of any insolvency proceeding.

12

Who is liable for a fictitious payee on a negotiable instrument?

The drawer has liability.

13

Define the "material alteration" of an instrument.

Changing the instrument in a manner that materially affects the nature of the instrument or payment terms.

14

List the two types of holder defenses that may be used against having to pay an instrument.

1.Personal;
2.Real or Universal.