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17 Cards in this Set
- Front
- Back
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What are the Three Common Article 3 (Commerical Paper) Problems?
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1. Good-Faith Purchaser vs. Obligor
2. Good-Faith Purchaser vs. True Owner 3. Transferee vs. Transferor 4. Notes & Drafts |
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Basis Steps of Analysis for Commercial Paper
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1) Is the Instrument Negotiable?
2) Is the P a Holder in Due Course? 3) What is the Liability of D? 4) Is the Defense Raised One that is Cut Off? |
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When a Transferee takes an Instrument as a Holder in Due Course that Title is Good Against Who?
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The WHOLE WORLD
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What is a Note?
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A Note is a two party instrument in which one party (Maker) promises to pay a second party (Payee) a sum of money.
*A Promissory Instrument |
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What is a Certificate of Deposit?
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An instrument from the bank acknowleding the bank recieved a sum of money and promises to repay. (Treated as a note).
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What is a Draft?
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A Draft is a three party instrument in which one party (Drawer) orders a second party (Drawee or Payor) to pay a sum to a third party (Payee).
Types: 1) Check 2) Traveler's Check 3) Money Orders 4) Implied Promise |
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A Negotiable Instrument must meet what Requirements?
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1) Be Written
2) Signed (Maker or Drawer) 3) Contain an UNCONDITIONAL PROMISE or ORDER 4) Pay a Fixed Amount (Regardless of Interest) 5) Be Payable to ORDER or BEARER 6) Payable on DEMAND or DEFINITE TIME 7) No undertaking or instruction given by maker or drawer *AT TIME OF ISSUANCE |
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An Instrument is Condition If:
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1) Express Condition to Payment
2) Subject To or Governed by Another Writing 3) Rights or Obligations Stated in Another Writing |
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What is Bearer Paper vs. Order Paper?
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Bearer Paper - Provides payment to be collected by whoever is in possession of the instrument. (Bearer, Order of Bearer, No Payee, or Cash)
Order Paper - Paper ordering payment to a specific person. (Pay to Brian) |
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Can a Person Be Held Liable for a Promissory Note if he has NOT Signed it?
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No, unless a person has signed the instrument or an agent has signed for them there is no liability.
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Is a Person Liable on an Instrument if their Signature is Forged?
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No, but signor is liable
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What are the Requirements to be a Holder in Due Course?
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1) Take for Value
2) Act in Good Faith 3) Take Without Notice that: a. it is overdue or has been dishonored b. of an unauthorized signature or alteration c. of any defense against or claim to it |
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Exception to HDC?
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Instrument taken by:
1) Legal Process or purchase in execution, bankruptcy, or creditor's sale 2) Purchase in bulk transaction 3) successor interest to an estate |
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Rights of a HDC (Real and Personal Defenses)
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1. Take Free of Adverese Claims
Except: 2. Real Defenses: a. Infancy b. Duress, Lack of Legal Capactiy, Illegality c. Fraud (Inducement) d. Discharge of Insolvency e. Discharge of another nature which HDC has notice 3. Fraud (In Factum, no Inducment) 4. Personal Defenses (Cannot be raised against HDC delt with directly) 3. Alteration 4. Forgery 5. "No Title" 6. Lack of Delivery |
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When is Alteration a Defense?
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1. When alteration is fraudulent, parties obligation is discharged. (except against HDC)
2. HDC may enfore only original tenor 3. When alteration consist of unauthorized completion, then HDC may enforce as completed. |
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Warranties of Transferor:
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1) Transferor is entitled to enforce instrument
2) all signatures are authentic and authorized 3) instrument has NOT been altered 4) instrument is not subject to defense or claim 5) Transferor has no knowledge of insolvency proceddings. |
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Right to Enforce Lost Instrument:
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A person not in possession may enforce it if:
1) Person was in possession and entitled to enforce it when loss occurred 2) loss was not the result of transfer or lawful seizure 3) person cannot reasonably obtain possession of the instrument. |
