Business Entites Short Answer (Feb 00)

Front 1

What are the requirements for an instrument to be conisered negotiable?

Back 1

The requirements for negotiability are set for the La. Rev. Stat and are that the promise or order must be:

-Signed (any intent to authenticate);

-In writing (intentional reduction to tangible form);

-Unconditional (promise or order must not be subject to condition, provisos, or qualifications);

-To pay a fixed amount of money, with or without interst (this is any currency, but no a nonmonetary commodity)'

-Payable to Order or Bearer

-Must not state any unauthorized undertaking or instruction by th emaker or drawer to do any act in addition to the payment of money. Specific "authorized" undertakings (to give or protect collateral, authorize the holder to confess judgment or dispose of collateral, or waiver of the benefit of any law intended for the protection of the obligor) are permitted.

Front 2

requirements of negotiability

mnemonic

Back 2

must own

money
unconditinal
signed
time
order
writing
no unauthorized promises

Front 3

John Jones owes Sam Smith $100, which John says he will pay Sam on September 15, 1997. Draft the one-sentence body of a negotiable promissory note to evidence John's obligation.

Back 3

"I promise to pay to the order of Sam Smith $100 on September 15, 1997. /s/ John Jones."

Front 4

What req must a holder of a negotiable instument meet to become a "holder in due course"

Back 4

To be a holder in due course, the holder of negotiable instrument must take:

-in good faith

-for value

-Without notice:
-That the instrument is overdue or has been dishonored
-That the instrument has been altered or bears an unauthorized signature.
-Of any claim to the instrument, including a claim in recoupment, or nay defense that mya be asserted by any party to the instrument.

in addition to these traditional requirments, the instrument must not, on its face, bear such apparent evidence of forger or alteration, and must not otherwise be so irregular or incomplete as to call into question its authenticity.

The other two requirements for hdc status are that the instrument must be negotiable and the transferee must be a holder. However, the question makes clear that those requirements are satisfied since it refers to aholder and on can only be a hodler of anegotialbe instrument.

Front 5

What are the advantages of being a holder in due course

Back 5

The advantages of being aholder in due course, as distinguised from an ordinary holder, is that the hdc can enforce th einstrument free of all claims in reocupment of the obligor but subject othe real defenses.

Front 6

What are the real defenses

Back 6

-such duress, incapacity, or illegaility as would nullify the obligation under the Louisiana Civil Code
-Infancy, to the extent it is a defense under a simple contract;
-Fraud in factum, as distinguised from fraudulent inucement (obligor induced to sign instrument with neither knowledge nor reasonalbe opportunity to learn its character or essential terms); and
-Discharge by insolvency

Front 7

Ann gives betty a blank check from Ann's checkbook, telling Betty to fill it in and sign Ann's name to purchase a few items for Ann at the supermarket. Will Betty's signing of Ann's name on the check constitute forger or an unauthorized signature? Why or why not?

Back 7

-A signature by an authorized agent is binding on the represented person
-However if the person exceeds the scope of their authority, e.g. writes and signs the check tp pay for personal expenses... their signature could be regarded as unauthorized and, as such, ineffecive against----

Front 8

List 3 warranties owed by any perosn who obtains payment or acceptance and owed by allprior transferors to any person who in good faith pays or accepts an instrument upon presentment.

Back 8

look at next 3 cards

Front 9

warranty 1

Back 9

that the warrantor is, or was at the time the warrantor transferred the instrument, a perons entiitled to enforce the instrument or authorized to obtain payment or acceptance of the instrument on behalf of a person entitled to enforce the instrument

Front 10

warranty 2

Back 10

that the warrantor has no knowledge that the signature of the maker or drawer is unauthorized; and (iii) that the instrumnetn has not been altered

Front 11

warranty 3

Back 11

All other payors receive only a warranty that the perons obtaining payment and prior transferors are entitled to enforce the instrument. By failing to distinguish between drawees an other payors, this quesiton is flawed, but is clear that the answer sought relates to the three presentment warranties made to the drqee of an unaccepted draft.

Front 12

Ex of a blank endorsement and effect

Back 12

/S/ John doe

The effect of a blank indorsement is to make the instrument payable to bearer, which means it can thereafter be negotiated by transfer of possession alone. Hence, enve a thief can transfer good title to bearer paper.

Front 13

Ex of a special endorsement and effect

Back 13

Pay to the order of jane Smit, /s/ John doe.

A special indorsement, by contrast, identifies the person to whom the instrument is payable. In that event, furhter negotiation would require indorsement by the named transferee, o her auhtorized agent, as well as transfer of possession. By making a special indorsement, a hodler can convert a bearer instrument into no that is payable to a particualar person. Conversely, order paper can be converted to bearer paper by the blank indoresment of the named payee

Front 14

Describe briefly the difference between a guaranty of payment and a guaranty of collection. Do the words " i guarnaty this instrument' guarnaty payment or collection?

Back 14

A guaranty of payment is an undertaking to pay th einstrument in the event of default by primary obligor. The accomaodation party to a negotiable instrument is liable in the capcity in which he or she signs (maker or indorser. By contrast, a person who signs as a collection guarnator is obliged to pay the instrument only after the person entitled to payment has exhaused collection efforts against the primary obligor, or demonstrated that such efforts would be futile. Since a peron swho guarantees colleciton rather than payment makes a specila contract, such person must use unambiguiosu terms to evidenc th limited nature of the undertaking. The words, ' i guarnatee this instrument' are not sufficiently unambiguous to indicate that collection is guaranteed rather than payment of the oblgiation fo the accommodated party.