Term
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Definition
| The account holder who draws an order (writes a check) |
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Term
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Definition
| The person to whom an order is made out - i.e., the person being paid with the order |
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Term
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Definition
| The two broad types of commercial paper |
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Term
1. Written and signed
2. Unconditional
3. Transfer Money
4. Fixed Amount
5. Magic words of negotiability
6. Definite time for payment
7. No extraneous undertakings |
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Definition
| The requirements for commercial paper to be negotiable |
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Term
"Pay bearer"
or
"Pay to cash"
or
[Blank payee line] |
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Definition
| Three ways to meet the "magic words" requirement for bearer paper |
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Term
"Pay to the order of..."
or
"Pay .... or order" |
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Definition
| Two ways to meet the magic words requirement for order paper |
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Term
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Definition
| Condition upon whose satisfaction the commercial paper may become due before the specified due date -- it is NOT a violation of the requirement for negotiability that the paper be "unconditional" |
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Term
Promises to:
1) Give, maintain, or protect collateral securing payment of the note
2) to allow the holder to confess judgment or dispose of collateral
3) To waive protections for the maker or indorser (e.g., the right to notice of dishonor) |
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Definition
| Three promises that may be attached to a negotiable instrument without violating the "no extraneous undertakings" requirement for negotiability |
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Term
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Definition
| The first time the drawer of a draft or maker of an instrument turns over the instrument |
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Term
1) The underlying obligation is suspended until payment or dishonor
and
2) Accord & Satisfaction |
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Definition
| Two most-tested effects of issuance |
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Term
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Definition
| Using a discounted "full payment" instrument to finalize the settlement of an obligation |
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Term
1) Drawer must act in good faith to settle a bona fide dispute with respect to the existence or amount of a debt
2) The "full payment" legend appears conspicuously on the instrument
3) Payee obtains/accepts paymentwithin 90 days and does not refund |
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Definition
| Three requirements for accord & satisfaction |
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Term
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Definition
| A person in possession of an instrument and entitled to payment |
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Term
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Definition
| Simple signature that makes order paper into bearer paper |
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Term
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Definition
| Signature that directs payment to a specific person |
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Term
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Definition
| Signature directing payment "for deposit only" |
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Term
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Definition
| People signing as guarantors of payment who promise to pay upon default - payee need not pursue collection against primary obligor |
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Term
1) Must prove by other evidence the terms of the instrument and entitlement to enforce it (including that they did not transfer it)
2) Must provide adequate protection against someone else coming forward (security) |
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Definition
| Two requirements to enforce a note that has been lost or stolen |
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Term
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Definition
| A holder who is entitled to enforce the instrument free of any personal defenses. |
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Term
1) Holder
2) Acquired the instrument for value
3) Took in good faith
4) Acquired instrument without notice of:
a) overdue, default, dishonored
b) unauthorized signatures or alteration
c) another's property rights to the instrument
d) any drawer/maker has a defense
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Definition
| Requirements of a Holder In Due Course |
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Term
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Definition
| Rule that provides that someone can take shelter in the rights of the person who transferred the note to them, such that a non-HDC may be able to enforce the note if they received it from an HDC |
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Term
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Definition
| Broadly, a defense that can be asserted against even a holder in due course |
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Term
1) Infancy (of the maker/drawer)
2) Duress, Lack of Capacity, Illegality
3) Fraud in the factum
4) Discharge in bankruptcy
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Definition
| The four real defenses that can be asserted against payment to anyone |
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Term
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Definition
| Maker did not know or have any reasonable way of knowing that the signed paper was an instrument -- a real defense |
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Term
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Definition
| Maker was tricked into signing an instrument in relation to a fraudulent scheme -- a personal defense |
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Term
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Definition
| One who signs an instrument in order to negotiate it and becomes secondarily liable on the instrument |
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Term
1) Dishonor
2) Timely notice of dishonor
3) Not signed "without recourse" |
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Definition
| Three requirements for collecting against an indorser |
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Term
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Definition
| Refusal of a maker or a drawee bank to pay a note that is due and presented |
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Term
1) Transferor is entitled to enforce
2) All signatures are authentic and authorized
3) Instrument has not been altered
4) Instrument is not subject to any defense or claim against the transferor
5) Transferor does not know that maker/drawer has initiated bankruptcy |
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Definition
| Five transfer waranties, on which transferors/indorsers may be liable to any subsequent transferee |
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Term
1) Fictitious Payees
2) Imposter
3) "Responsible Employees" |
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Definition
| Three odd cases in which forged indorsements are presumed valid and effective |
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Term
| General rule about alteration |
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Definition
| Alteration discharges maker/drawer liability |
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Term
Someone who acquired the instrument:
1) for value
2) in good faith
3) without knowledge of the alteration |
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Definition
| Requirements for someone to enforce a fraudulently altered note according to its original terms |
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Term
Someone who acquired the note:
1) for value
2) in good faith
3) without knowledge of fraudulent completion |
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Definition
| Requirements to enforce an instrument as completed which was signed and left incomplete, and later fraudulently completed |
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Term
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Definition
| Maker/Payee/Drawer whose failure of ordinary care substantially contributed to a forgery or alteration may not assert a defense based on that fraud against anyone who gave value for the instrument in good faith -- if both parties were negligent, loss is distributed per contributory negligence rules |
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