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Gleim > SU 19 Negotiable Instrument > Flashcards

SU 19 Negotiable Instrument Flashcards

(50 cards)

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1
Q

Promissory notes

A

promise
maker promises unconditionally to pay fixed amnt to order of payee or bearer on demand or definite time
maker signs or is ID’d in a note as person undertaking to pay

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2
Q

CD

A

form of promissory note issued by bank
receipt of # w/ unconditional promise to repays
bears interest

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3
Q

Draft

A

contains order
unconditional written order by 1 person (drawer) to another person to pay fixed amnt of $ to a 3rd person (ID’d person-payeer or bearer)

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4
Q

drawer

drawee

A 
orders pmt (person writing check)
ordered to make pmt (bank)
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5
Q

Types of drafts

A 
time- payable @ definite time in future
-trade acceptance
-post dated check
sight- payable on demand (presentation to drawee)
-check
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6
Q

certified check vs cashier’s check

A

certified- accepted by drawee bank, even if funds aren’t sufficient
-more = to $
cashier’s- drawn by bank on itself (bank = drawer & drawee)

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7
Q

Transfer

A

delivery (voluntary transfer of possession) by non issuer to give recipient right to enforce instrument

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8
Q

Negotiation

A

special transfer allows transferee to take instrument w/o personal defense
-transfer of possession (voluntary/invol by person that isn’t issuer)
transferee = holder

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9
Q

Elements of negotiability

A 
written/signed by maker/drawer
unconditional promise or order to pay fixed amnt of $
payable to order/bearer
payable on demand or definite time
can't state adtl undertaking
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10
Q

Promise or order is payable to bearer if

A 
doesn't state payee
indicates not payable to ID'd person
payable to cash or order of cash
payable to bearer or order of bearer
indicates person in possession gets pmt
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11
Q

Examples of bearer paper

A 
pay bearer
pay to order of bearer
pay to order of P.Cruz or bearer
pay any person presenting
pay $500
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12
Q

blank endorsement

A

not special
IDs not particular payee
only signature of endorser
order instrument endorsed in blank becomes payable to bearer

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13
Q

Special endorsement

A

ID’s person to whom instrument is payable

becomes payable to the order or special endorsee & requires his/her endorsement for further negotiation

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14
Q

Convert blank endorsement into special endorsement

A

write above the signature words ID’ing the payee

if payee is Blanche Dorser, she can endorse it then write above her endorsement Pay to Heidi Holden

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15
Q

Restrictive endorsement

A

restrict or further limit the negotiation; can’t prevent furth transfer or negotiation
examples
-conditional
-endorsement prohibit further transfer/negotiation
-endorsement for deposit or collection
-endorsement to fiduciary

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16
Q

Conditional endorsement

A

rights of endorsee depend on occurrence/non occurrence of specific event
maker, drawee, subsequent endorser must pay when due regardless if condition was satisfied

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17
Q

endorsement for deposit or collection

A

forces instrument into banking system
-for deposit only
-for collection
-pay any bank
limits negotiation; gives notice that they must comply w/ endoresement
-notice given to nonbanking persons, depositary bank, bank that makes immediate pmt OTC

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18
Q

qualified endorsement

A

disclaims or limits contractual liability (doesn’t get secondary liability if primary doesn’t pay)
“without recourse”
transfer of order for value gives transferee enforceable right to unqualified endorsement
-unqualified endorsement guarantees pmt of instrument if primarily liable party doesn’t pay

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19
Q

anomalous endorsement

A

made by person who isn’t the holder
anomalouse endorsement or sig w/ words indicating suretyship gives notice instrument was signed for accomodation
-accomodation endorser signs for benefit of another party

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20
Q

Holder

A

possession of negotiable instrument payable to bearer or ID’d person if ID’d person is the person in possession

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21
Q

Order instrument negotiated by

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A

transfer of possession and endorsement by holder

-holder doesn’t endorse, only transfer (assignment of transferor’s rights)

22
Q

HDC

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A

holder becomes HDC when holder takes

  • in good faith
  • for value
  • w/o notice of dishonor of instrument (overdue), alteration of signature, defense or claim
23
Q

Value part of HDC

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A

receiving instrument as gift or inheritance isn’t HDC
value isn’t consideration
-unperformed contractual promise isn’t value

24
Q

HDC based on partially performed

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A

amnt payable under instrument * value of part performance/value of full perf

25
Value given
promise has been performed or security interest/lien is acquired taking instrument in pmt of or security for pre-existing claim against person issue/transfer NI incur an irrevocable obligation to 3rd party
26
Demand instrument overdue at earliest of
day after demand for pmt 90 days after date for check os for pd after its date for noncheck
27
instrument payable at definite time is overdue
default on installment pmt of principle day after due date if instrument isn't payable in installments day after accelerated due date for principal
28
Shelter principle
person who doesn't qualify as HDC receives title thru HDC gets rights/privilege of HDC transferee party to fraud affecting instrument can't get HDC rights awareness of fraud won't prevent acquisition of rights of HDC
29
Holder | HDC
real defense and personal defense | HDC only real defense
30
Primary liability
req to pay by terms of instrument (unconditional) maker is primarily liable drawee that accepts draft is primary -if don't accept breached contractual duty to drawer (drawee owes no duty to payee or any holder) issuer of draft that is drawer and drawee is primary (i.e. bank that issuers cashier's check) draft doesn't have primarily liable party until accepted by drawee
31
Secondary Liability | drawer
obligation to pay arises if primary liable party fails to pay drawers and endorsers have secondary liability drawer-not liable unless drawee refuses to pay -drawee dishonors unaccepted draft, drawer must pay disclaim liab by drawing w/o recourse unless draft is check
32
Secondary liability | endorser
not liable unless drawee, maker, other endorsers don't pay unqual endorser liable to sub endorser or party entitled to enforce instruments liable in order endorsed (top down) avoid liab by qualified endorsement
33
Affect of acceptance on secondary liability
drawer discharged when accepted by bank (certification) accepted by nonbank drawer liab = endorser acceptance of draft by bank after endorseent discharges endorser acceptance varies terms, holder may refuse & treat as dishonored -holder agrees, obligation of drawer or endorser who doesn't expressly agree is discharged
34
Warranty liability
breach of warranty- transfers/presents for pmt an instrument that is defective (forged) may be only remedy for some ppl ppl w/ warranty liab w/o contractual liab -qualified endorser (w/o recourse) -negotiates instrument w/o endorsement -endorser discharged bc of holder's unexcused delay in making presentment
35
Transfer warranties
warrantor can enforce instrument signatures are authentic and authorized instrument not altered no defense or claim of any party is good against warrantor warrantor doesn't have knowledge of insolvency proceedings against maker, drawer, acceptor
36
Presentment
demand for pmt/acceptance to party obliged to pay (or bank) endorser's liab (not guarantor's) discharged if check isn't presented for pmt w/in 30 days after day of endorsement lack of endorsement justifies return w/o dishonor
37
Dishonor
refusal to pay triggers secondary liability person entitled to enforce can proceed directly against secondary party unaccepted drafts (ordinary checks) are dishonored by being returned or timely notice
38
Notice of dishonor
must give adequate notice (w/in 30 days after day of dishonor) to all prior endorser (not guarantors) or they are discharged -don't have to notify drawer
39
Real Defenses
defense to liab, stop collection from those with primary/secondary liability asserted against HDC & holder illegality extreme duress, legal incapacity (all 3 make obligation void), fraud in ex, unauthorized sig, fraud alteration, minority/infancy, discharge in insolvency, discharge when holder has notice
40
Personal Defense
traditional contract defenses are personal def effective only against holder & holder thru HDC(not HDC) fraud in inducement, unauth completion, failure of condition, lack/failure of consideration, theft, restrictive endorsement violated, pmt w/o instrument surrendered, breach of contract/warranty
41
Methods of discharge
pmt/tender cancellation- voluntary act by party entitled to enforce -surrender instrument -destruction -strike out signature (doesn't affect rights rec'd from endorsement) -add words to instrument renunciation-agree not to sue, renouce rights via signed writing reacquisition-transfer to ex-holder, who can cancel intervening endorsement
42
Other methods of discharge
``` fraudulent discharge certification of check impairment of collateral impairment of recourse unexcused delay in presentment or notice of dishonor ```
43
Document of title
record that allows transfer of ownership of goods in storage/transist 3 functions- receipts for good, contract between bailor & bailee, evidence of title to goods bailor-entrusts goods to bailee bailee-receives ppty & holds in trust
44
DOT is negotiable if
states goods are delivered to bearer or order of named person bearer- control of doc or doc payable to bearer or endorsed in blank
45
How are Negotiable docs negotiated
``` tangible docs negotiated by endorsement/delivery (electronic-no endo) bearer docs- delivery blank endo- converts to bearer doc special endo (specific person)- converts bearer to order doc forged- no negotiation (forgery is real defense) endorser not liable for default of bailee or prior endorser ```
46
Negotiable vs non negotiable doc
negotiable- must be delivered to holder of doc, agent, assignee holder- control of doc non negotiable- deliver to person named in doc
47
Warehouse receipts
issued by warehouse to person who deposits goods for storage depositor- bailor warehouse- bailee must exercise same care as reasonable person liable for damages from ordinary negligence/lack of due care can't limit liability if convert goods to its own use
48
Warehouse receipts must include
``` location of whouse date of issue, unique ID description of goods person (bearer, etc.) to whom goods are to be delievered whouser's sig ```
49
Bill of Lading
evidence of receipts of goods for shipment bailee- carrier bailor- shipper carrier has lien on good (enforce by public/private sale)
50
Common carriers liability
``` special bailees are subject to strict liability for losses for goods in transit not liable for damages caused by -act of God -fault of shipper -act of public enemy -act of public authority -inherent nature of goods limit liab by contract & notation on BOL (doesn't apply if carrier converts good to its own use) ```

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