"I promise to pay to the order of C $50,000" Signed J

It's the promise to pay

Parties

1. Promisor is caled the MAKER

2. Promisee is called the PAYEE

"Pay to the order of X" Signed B

It's a check!

Think of the draft as a commander because it orders or commands

Parties:

1. DRAWER gives the order

2. DRAWEE is ordered to pay

3. PAYEE is beneficiary of order (collects)

1. Must be writing

2. Payable to order or to bearer

3. Signed by maker or drawer

4. Reciting a sum certain

5. Containing unconditional promise or order

6. Payable on demand or at a definite time

7. Payable in currency

Negotiability: Trick Question

Is it negotiable if it states "Pay to Andy Garcia"?

NO! Unless it is a check. Instead it is merelt a contract. Why?

It doesn't contain the words "order, assign, bear"

1. CONTRACT LIABILITY

2. SIGNATURE LIABILITY

The promisor in the promissory note

By merely signing his name to the instrument, enters into a contract, whereby he agrees to pay instrument. If he fails, it's a breach

Indorser signs his name on the back of the instrument

Indorser promises to pay if check bounces. If he doesn't honor it, he can be sued

WITHOUT RECOURSE: If indorser includes this, he passes title without liability

The party who signs the check

Person promises to pay and can be sued for not paying

Pays on the draft

Entitty who is paying out. Usually the bank. DOES NOT SIGN and therefore is not liable

Warranties or Transfer Liability

(Those who sign) Warrant: 5 Things

1. That plaintiff has good title to instrument

2. All signatures are genuine and authorized

3. Instrument has not been materially altered

4. There is no defense or claim good against the defendant, meaning instrument is enforceable

5. Defendant has no knowledge of any bankruptcy or insolvency action against maker or drawer

Means proper transfer of the instrument. If improper, transferee is not a holder.

1. Payable to order: when delivered to payee

2. Payable to bearer (no indorsement required)

3. Indorsement: Must be indorsed or indorsed by a special person so named

1. For Value: Different than consideration

2, Good faith: Good faith is honesty in fact (subjective) and oberservance of reasonable commercial standards (objective)

3. Without Notice: Holder must acquire without notice of instrument being overdue, dishonored, or subject to defense or claim, stole, being paid, void, ect.

1. Basic: Tranferee acquires whatever rights transferor had

2. Transferee takes shelter in status of transferor

3. "Steps into the shoes" of a HDC. Even though they may fail (donee e.g. no value) they still gain status as HDC

1. Lack of consideration

2. Unconscionability

3. Waiver

4. Estoppel

5. Fraud in the Inducement

1. Material Alteration

2.Duress

3. Fraud in the Factume

4.Incapacity

5. Illegality

6. Infancy

7. Insolvency

1. Forged Drawer's Signature: Drawee recredits drawer if they accept forgery

2.Drawee can proceed against theif. Drawer is liable if negligent:

a. employer liable for employee handling checks

b. Bank customer has 30 days to report wrong

c. If imposter induces drawer to write check, drawer negligent

d. Leaving spaces on instrument or failing to follow internal procedures against forgery