Flashcards in General Assessments Deck (24)
Who is the payee on a draft?
The person to whom the negotiable instrument is payable
Payment dates of negotiable instruments
1. The holder of the NI may freely extend the time when payment is due
2. Extensions, conditioned on the option of the maker, do not destroy negotiability when the extension is to a further definite time
3. Events that are undoubtedly to occur, but are uncertain as to when, are not ascertainable
Negotiation is __________________ of possession of an instrument by any person other than the issuer to a person who thereby becomes the holder.
1. An instrument is converted if it is taken by transfer, other than a negotiation, from a person not entitle to enforce or receive payment from the instrument.
2. Conversion is generally limited to the amount payable on the instrument.
3. A person who did not receive delivery of the instrument may not bring a conversion action.
Taking an instrument in good faith requires both honesty in fact and observance of reasonable commercial standards of fair dealing. Honesty-in-fact is judged by a(n) ______________ standard, and the reasonable commercial standards of fair dealing are judged by a(n) _____________ standard.
subjective ; objective
What constitutes value in acquiring an instrument as a HDC?
1. Forgiveness of a previous obligation
2. Completion of the agreed-upon performance
3. Paying less than the note's full value
1. If the completion is unauthorized, the obligor is generally discharged.
2. If the completion is unauthorized, a payor bank can enforce the instrument as completed.
3. If the completion is unauthorized, a holder in due course can enforce the instrument as completed.
For notes payable at a definite time, the action must be brought within how many years of the note’s due date?
Discharge in insolvency proceedings
Statute of limitations
Alteration and forgery
Principal's liability on an agent's signature
1.The principal is not bound if the agent did not have authority to sign on the principal’s behalf.
2.The principal may ratify the agent’s unauthorized signature if the principal adopts the signature.
3.The principal may ratify the agent’s unauthorized signature if the principal fails to deny the signature’s validity.
1. The draft has not been altered
2. The warrantor is the person entitled to enforce the instrument
3. There are no unauthorized indorsments
Can an indorses disclaim liability?
In addition to a maker, who may issue an instrument?
In order for an instrument to be negotiable, the __________________ must be fixed.
Who is a party to both a note and a draft?
A holder in due course is subject to any ___________________.
Oftentimes, the event that triggers a breach of a transfer warranty is ____________.
A thief steals a check and indorses it
The ____________ of an instrument is its delivery by a person other than the maker or drawer for the purpose of giving the person receiving it the right to enforce the instrument.
When can an obligor be discharged on the instrument?
When there has been an unauthorized modification on the instrument
When a fraudulent indorsement is effective in favor of a person who, in good faith, pays the instrument or takes it for value or for collection, when may that person be liable to the person who bears the loss?
When that person fails to exercise ordinary care in taking the instrument and that failure substantially contributes to the loss resulting from payment of the instrument
Can a non-HDC be subject to a lack of consideration defense?
In order to be an accommodation party under Article 3, a person must
sign the instrument
Liability between a bank and its customers
1. A bank is subject to the properly payable rule.
2. A customer may sue a bank for damages proximately caused by a bank's wrongful dishonor of a check.
3. A bank may properly pay a postdated check unless the customer gives the bank timely notice of the postdated check.