Study your flashcards anywhere!

Download the official Cram app for free >

  • Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key


Play button


Play button




Click to flip

54 Cards in this Set

  • Front
  • Back
What is liability of drawer when bank certities check
NONE discharged but bank primary liability
Can a bank charge its drawer even though no funds?
yes as long as draft was propery payable
Can drawee bank recover money it paid to payee who presented check and received paymen?
NO rule of finality unless payee breached warranty of presentment
What are warranties of presentment?
1) good title 2) signature is genuine 3) instrument not materially altered 4) no defense good against him 5) no knowledge of bk of maker
When Holder wants to recover against the maker what anaylsis do you go through?>
1. NI?
2. Negotiated?
3. HDC?
Requirments for NI
8 of them
1. writing
2. signed by maker or drawer
3. unconditional
4. promise or order
5. to pay fixed amt of money with or without interest
6. with no unauthoirzed promises
7. payable either on demand or at a definite time
8. to bearer or order
Result if not NI?
What to look at to determine negotiability
Last endorsement
What result if holder crosses out an endorsers name?
then discharges that endorser's secondary liability
2 types of negotiation possibilities
1. ORDER ( to specific person)
2. BEARER (blank endorsement or to cash or signed)

For order must have endorsement and delivery

BEARER=just delivery can be involuntary
3 requirments for HDC
1) gave value
2) took in good faith
3. no notice of claims or defenses
describe good faith for HDC
1. subjective
2. Objective observance of reasonable commercial standards of fair dealing test
For NI what kind of currency is ok?
ANY TYPE even foreign
Does saying where funds for NI come from making it conditional
NO it is ok
What would make a instrument conditional?
have to look to another writing to figure out but reference to security collateral is ok!!
If words and numbers are inconsistENT WHAT result?
Words control under k interpretation law
What are the only promises allowed that would not impair NI (2)
1) attorney fees if default
2) referecne to maintain collateral
What is result if no date on when payable
Are accelleration clauses impairment on NI
NO ok because if dont have then every time default have to sue so could be attorney malpractice to not include one on note
Does value for HDC work on antecedent debts?>
YES but not on executory unperformed services
If take as gift can you be a HDC?
no unless shelter rule and person before was HDC
When governs notice for HDC
time of payment
Can DB be HDC?
Yes if they give value and pay out on check
Is it possible to be partial HDC?
Yes if pay for 1/2 of the note andthen before pay other half find out about defense
When is check presumed overdue
when over 90 days then have notice
Always Non-HDC's no matter what unless shelter rule 3 of them
b1. buyers from bulk
2. buers from estate sale
3. buyer from judicial sale
F=Forgery and fraud in factum
A=lteration, adjudicated insantiy
I=infancy and illegality
D=uress, discharge in bk
S=urety defenses, S of L
S of L as real defenses (MYLEGS)
Y=1 yr
S=urety ship (main purpose
Explain special FTC rule where financer never HDC and is just holder
1. Human (not corporation)
2. Consumer goods (used for family purposes, not business)
3. Or consumer services (health club and dance lesson k)
4. On credit (if 5 or more installments rule applies, but if 4 or less n/a)
Explain shelter doctrine
Anyone who takes after HDC gets same rights as that HDC even if donee or knowledge UNLESS PARTICIPANT IN FRAUD
When does holder go after endorser?
When holder presents, it is dishonored, and notice of dishonorment given to endorser then endorser has secondary liability unless signed without recourse
What requirment must be present for trasnfer warranty
Transferor trasnfered for consideration
what warranites come with transfer warranty
1. right to enforce
2. signatures are genuine and no forgery
3. no alterations
4. no defenses
5. no knowledge of insolvency
What comes with presentment warranties?
that right to enforce but no warranty that signatures are genuine and no forgeries
When is drawee liable to holder?
When certifies or accepts
When does drawer bring suit against drawee?
When drawee bank should not have paid out because check forged but they did anyway, thus they are liable unless they fall under exceptions
Exceptions where drawee paid out on bad check and not liable to drawer?
1) fititious payee/imposter
2. drawer negilgient in drawing
3. drawer negligent in notifying bank
When drawee bank has right to pay and is not liable?
1. post-dated
2. drawer dead
3. overdraft just charge account
when can bank not pay no matter what?
If drawer puts a stop payment on a check
Even if drawer is negligent what can drawer prove to make drawee split the loss
That bank was neglgient too
Explain fititious payee
Payee claims to be someone else and drawer is negligent in believing
Explain negligence of drawer in allowing payroll padding?
Make up names of fake employees and crook endorses to himself and cashes
examples of drawer negligence
1. leaving out automatic check device
2. leaving out blank checks
3. making out check and leaving blank spaces or writing out check with pencil
Describe drawer negligence in notifying bank?
1.If 1 time forgery must notify bank within 1 yr

2. if multiple forgeries by same forger get 30 days from statement to notify or barred
What is the rule for when drawee bank pays on forged instrument in regards to the innoncent party who got paid
CANNOT recover from the party because of the rule of finality
But what theory can bank recover from innoncent party on
Breach of transfer or presentment warranty
3 possible defendants for conversion action?
1. The person who stole the instrument
2. A drawee bank that pays an instrument to a person who was not entitled to enforce it commits conversion
3. Co-payee if multiple co-payees required and one payee signs and deposits that payee and the bank have committed conversion
If amount of name not filled in but agreed to is it NI
YES and payee can fill it
Comaker v- AP
Co-maker signs on front and is liable jointly and severally but can get contribution if he pays more than he share

AP= signs on back and is liabe secondarily and if gone after and he pays then gets ntoe and all the rights of the note so can go after security
Way to release AP's secondarily liability
Impair or change security by releasing
If note is lost or destroyed what must maker do to enforce it?
prove terms of note, why lost, ownership, and ct might ask holder to put up security incase someone else finds if bearer paper and collects on it
If Holder/payee loses note, but maker pays anyway, does this discharge Maker's obligation?
If Holder indorsed and then lost then bearer paper, but if did not indorse and then lost then no one could ever qualify as HDC
Elements for Accord and satisfaction?
1. Unliquidated or disputed claim
2. Instrument tendered as full satisfaction conspiciously
3. Collection then discharges debtor's obligation
Exceptions where no A and S?
i. Organization designated agent conspiciously then no A and S unless sent to agent
ii. Sends back $ within 90 days to avoid advertant A and S