Commercial Paper

Front 1

Types of Commercial Paper are governed by:

Back 1

Articles 3 and 4

Front 2

The types of commercial paper governed by Articles 3 and 4 can be divided into: ________ & ________

Back 2

notes & checks

Front 3

Note

Back 3

a two party instrument (maker and payee)

maker: person who signs/is identified as undertaking to pay

payee: person to whom the note is payable

("I, maker, promise to pay payee $50")

Front 4

Check

Back 4

a three party instrument (drawer, drawee, payee)

drawer: person who signs or is identified in a check as ordering payment

drawee: person ordered in a check to make payment

payee: person to whom check is payable

(Drawer signs check to pay Payee from Drawee Bank)

Front 5

Bank Checks

Back 5

1) cashier's check: drawer and drawee are the same bank

2) teller's check: drawer is a bank and a different bank is drawee

3) certified check: drawn by drawee's bank's customer and "accepted" by drawee bank (typically by stamping "certified")

Front 6

If a particular piece of commercial paper is a negotiable instrument then ________ governs and person holding instrument may be able to claim ____________ status.

Back 6

Article 3; holder in due course

Front 7

If commercial paper is non-negotiable, Article 3 does not apply and ________ apply.

Back 7

general principles of contract law

Front 8

Article 3's Requirements for a Negotiable Instrument

Back 8

1) Writing
2) Signed by Maker (note) or Drawer (check)
3) Promise to Pay (note) or Order to Pay (check)
4) Unconditional
5) Fixed Amount
6) Money
7) No Other Undertaking
8) Payable On Demand or at a Definite Time
9) Payable To Order or to Bearer

Front 9

Article 3's Requirements for a Negotiable Instrument

"Writing"

Back 9

Cannot be oral; must be tangible (need not be piece of paper)

Front 10

Article 3's Requirements for a Negotiable Instrument

"Signed" by Maker (note) or Drawer (check)

Back 10

Any symbol executed or adopted by a party with a present intention to authenticate a writing; key = intent

Front 11

Article 3's Requirements for a Negotiable Instrument

Promise to Pay (note) or Order to Pay (check)

Back 11

A note must have a promise; an IOU or acknowledgment of debt will not count.

A check is an order from drawer to drawee to pay money to payee; "I wish you to pay" will not count.

Front 12

Article 3's Requirements for a Negotiable Instrument

Unconditional

Back 12

Promise or Order must be unconditional.

Cannot have promise/order "only if" or "on the condition that"

Cannot be "subject to" or "governed by" the terms of another agreement. [Unless rights concerning collateral, prepayment or acceleration are stated in another writing.]

[Stating "in consideration for..." is okay. So is a mere reference to another agreement - "in accordance with," "as per." Also allowed to limit payment to a particular source of funds - "$30 out of the proceeds from house sale."]

Front 13

Article 3's Requirements for a Negotiable Instrument

"A Fixed Amount" of Money

Back 13

When instrument is payable, holder must be able to determine principal amount due from instrument itself.

Applies only to principal, not to interest or any other charges.

Conflicting words and numbers ("500" vs. "five thousand") - words control.

Front 14

Article 3's Requirements for a Negotiable Instrument

"Money"

Back 14

Must be a currency; foreign is fine.

(Can't be "pounds of flour," etc.)

Front 15

Article 3's Requirements for a Negotiable Instrument

"No Other Undertaking"

Back 15

Can only be a simple, unconditional promise/order to pay fixed amount of money. [Can't be "to pay $40 and deliver TV"]

Exceptions:
- give/maintain collateral securing payment
- authorizing holder to confess judgment/realize on any collateral
- waiving legal protections
- promise to pay costs of collection/atty's fees

Front 16

Article 3's Requirements for a Negotiable Instrument

"On Demand or at a Definite Time"

Back 16

Holder of instrument must be able to tell when it comes due.

Undated, post-dated, acceleration clause are all ok.

Not ok: "payable on death of X's father" - unascertainable date at time of issue

Front 17

Article 3's Requirements for a Negotiable Instrument

"Payable To Order or To Bearer"

Back 17

Must be order paper or bearer paper.

Front 18

Promissory Note Order Paper

Back 18

A promissory note made payable 1) "to the order of" 2) an identified person.

"I promise to pay 'to the order of Payee'"/"to Payee or his order"

Front 19

Promissory Note Bearer Paper

Back 19

A promissory note made payable to the bearer of the instrument.

"I promise to pay 'bearer'"/"to the order of bearer"/"to the order of cash"/"to cash"/"I promise to pay Payee or bearer"

Front 20

Check Order Paper

Back 20

A check made payable 1) "to the order" of 2) an identified person.

"Pay to the order of Payee"/"to Payee and his Order"

"Pay Payee." (important check exception)

Front 21

Check Bearer Paper

Back 21

A check made payable to the bearer of the instrument.

"Pay to the order of cash"/"to the order of bearer"/"to bearer"

Front 22

"Pay to _____"

Back 22

Bearer Paper

Front 23

"Negotiation"

Back 23

A transfer of an instrument in a way that makes the transferee a holder.

[Differs from assignments in k law, where the assignee has no greater rights than the payee/assignor.]

Front 24

"Holder"

Back 24

A person in possession of bearer paper

or

A person in possession of order paper that has been property issued or properly indorsed to her.

Front 25

How to Negotiate Issued Order Paper

Back 25

1) Indorsement by the holder AND 2) Transfer of possession

Front 26

Indorsement

Back 26

Signature on an instrument for the purpose of negotiating it and/or making indorser liable under indorser liability.

Front 27

Special Indorsement

Back 27

Also names a particular person as indorsee - person to whom intrument is next payable.

Front 28

Blank Indorsement

Back 28

Does not name an indorsee; generally just holder's signature

Front 29

Anomalous indorsement

Back 29

Indorsement by person who is not the holder; not effective for negotiation

Front 30

How to Negotiate Issued Bearer Paper

Back 30

Transfer of possession alone (voluntary or involuntary)

Front 31

After issuance, indorsements determine whether instruments are order/bearer paper.

If order paper is indorsed in blank, it becomes:

Back 31

bearer paper

Front 32

After issuance, indorsements determine whether instruments are order/bearer paper.

If bearer paper is specially indorsed, it becomes:

Back 32

order paper

Front 33

How can a holder convert a blank indorsement to a special indorsement?

Back 33

Naming indorsee above the blank.

Front 34

A depositary bank can become a holder without ________

Back 34

signature of the depositor if the depositor was the holder at the time of the deposit.

Front 35

Can a person be a holder if a necessary indorsement was forged? Why or why not?

Back 35

No. Because an unauthorized signature is ineffective.

Front 36

Negotiation of order paper can only be done by _______.

Back 36

the holder

Front 37

When order paper contains a forged indorsement, who is the holder/entitled to the money after the forgery?

Back 37

None of the parties from the forger on are holders.

Front 38

To be a holder of bearer paper, you just need ______ of it.

Back 38

Possession (even if stolen or involuntary)

Front 39

A person who is not in possession of a negotiable instrument can pursue an action to collect on it if:

Back 39

1) he was entitled to enforce the instrument and 2) it was lost, stolen or destroyed

Front 40

No person or entity can be liable on a negotiable instrument unless:

Back 40

her/its signature appears on the instrument

or

the signature of an authorized agent

Front 41

A forged or otherwise unauthorized signature is _____________ (irt liability)

Back 41

not effective as the signature of the name signed

also, it binds the agent

Front 42

Examples of Unauthorized Signatures

Back 42

outright forgery, signature by an agent in excess of actual/apparent authority

Front 43

A signature by an authorized agent is

Back 43

valid just as if made by the principal

Front 44

If 1) an agent signs her own and 2) the principal has given her authority to sign on its behalf, the agent is not bound if:

Back 44

the form of the signature 3) shows unambiguously that it was made on behalf of the principal and 4) the principal is identified in the instrument

Front 45

If agent fails the lack of personal liability test, what result?

Back 45

She will be able to avoid personal liability only by proving that the original parties did not intend for her to be liable on the instrument.

However, even if she proves this, if an HDC without notice that agent was not intended to be liable on note is enforcing against the agent, HDC will take free and clear of agent's defense and agent will be liable.

Front 46

Maker's Liability on a Note

Back 46

obligated to pay note according to terms at time issued

owed to person entitled to enforce the note; also to indorser who has paid note due to indorser liability

Front 47

Except as otherwise specified in the instrument, two or more persons who sign an instrument as co-makers (or co-drawers) are:

Back 47

jointly and severally liable

Front 48

Unless otherwise agreed, a party having join and several liability is entitled to:

Back 48

contribution from his join and several co-makers (or co-drawers)

Front 49

Drawer's Liability on a Check

Back 49

Obligated to pay the check according to terms when drawer signed instrument.

Liable only after presentment and dishonor by drawee bank. (Generally not entitled to notice of dishonor).

Owed to person who is entitled to enforce the check & to indorser who has paid the check due to indorser liability.

Front 50

Drawee Bank's Liability on a Check

Back 50

Not obligated to pay unless the bank accepted the check - (signature, certificate)

Front 51

Indorser's Liability on the Instrument

Back 51

Obligated to pay according to terms of the instrument at the time of the indorsement.

Owed to person entitled to enforce the instrument & the person indorsing later in time who has paid the instrument due to indorser liability.

Conditioned on: 1) timely presentment and 2) dishonor of instrument

Front 52

Indorser's Liability is Conditioned on Timely Presentment and Dishonor of the Instrument

Timely Presentment

Back 52

A formal demand for payment.

With a check, the indorser is discharged if the check is not presented for payement or given to depositary bank in within 30 days of indorsement.

Front 53

Indorser's Liability is Conditioned on Timely Presentment and Dishonor of the Instrument

Dishonor of the Instrument

Back 53

The instrument isn't paid when due.

With a check, the drawee bank must dishonor by returning (or sending notice) by its midnight deadline. Otherwise, indorser's liability is not triggered.

Midnight deadline expires midnight of the next banking day following the banking day on which the drawee bank received the check.

Front 54

Timely Notice of Dishonor

For a check, a depositary bank that wants to sue on indorser liability must give indorser notice of dishonor before

Back 54

bank's midnight deadline

(midnight of the next banking day following the banking day that the bank itself received notice of dishonor from drawee bank)

Front 55

Timely Notice of Dishonor

For a check, any other person (besides a depositary bank) that wants to sue on indorser liability must give indorser notice of dishonor within

Back 55

30 days following the day on which she herself received noticed of dishonor

Front 56

Timely Notice of Dishonor

For a note, notice of dishonor must be given within

Back 56

30 days after the dishonor occurs

Exception: a note due at a definite time is deemed dishonored without presentment if it is not paid when due.

Front 57

Can presentment and notice of dishonor be waived or excused?

Back 57

yes.

Front 58

Indorsement "Without Recourse"

Back 58

Negates indorser liability.

Front 59

General Rules of Discharging Liability

If the instrument is paid to the proper person,

Back 59

payment discharges the paying party's liability on the instrument and liability on the underlying obligation

Front 60

General Rules of Discharging Liability

If the instrument is dishonored,

Back 60

the party is liable on the instrument and on the underlying obligations (but only 1 recovery)

Front 61

Tender of Payment

Upon the holder's refusal of a maker's tender of payment, an indorser who has a right of recourse with respect to the obligation to which the tender relates

Back 61

is discharged to the extent of the amount covered.

Front 62

Tender of Payment

A tender of the amount due discharges any duty to pay interest ________.

Back 62

after the due date

Front 63

Cancellation

Any person entitled to enforce the instrument may discharge any party by:

Back 63

a voluntary affirmative act

(surrendering the instrument to the party to be discharged; writing "void," "paid," "discharged" on the instrument; striking out the signature of the party to be discharged, tearing up instrument) - no consideration is required

Front 64

Renunciation

Any person entitled to enforce the instrument may discharged any party by a signed writing agreeing

Back 64

not to sue or otherwise renouncing rights against the party to be discharged.

No consideration required.

Front 65

Discharge on a Simple Contract

Any person liable on an instrument can be discharged by

Back 65

any act or agreement that would discharge that party's liability on a simple contract

Front 66

When an instrument is a bank check, the underlying obligation is discharged when

Back 66

the check is taken by the payee

Front 67

With respect to liability on the instrument for bank checks

Back 67

Cashier and teller checks: issuing bank is liable on the check

Certified checks: certifying (accepting drawee bank) is liable on the check

The bank's liability on a bank check is discharged when a bank pays the proper person (typically the holder)

Front 68

Whenever a person voluntary transfers an instrument (note or check) for consideration [transferor's signature not required], the transferor makes a number of separate transfer warranties at time of transfer. They are:

Back 68

1) transferor is a person entitled to enforce agreement
2) all signatures are authentic and authorized
3) instrument has not been altered, and
4) no defense or claim of any party is good against the transferor

Front 69

Transfer warranties are not made by:

Back 69

drawer of check or maker of note

Front 70

If a transfer is an indorsement, the transfer warranties run to:

Back 70

all subsequent transferees

Front 71

If a transfer is other than by indorsement, the transfer warranties run to:

Back 71

only the immediate transferee

Front 72

An owner of a lost or stolen check may recover in _____ if the check is taken or paid over an unauthorized indorsement. Who can recover? Who is liable?

Back 72

conversion

Recover: owner, but only if she (or her agent) had taken possession. drawee may not sue and recover in conversion.

Liable: drawee bank, depositary bank, anyone else who took the check and did not act in good faith

Front 73

Holder in Due Course status is important because it:

Back 73

strips the party obligated to pay on an instrument of "personal defenses"

Front 74

A Holder in Due Course is:

Back 74

1) a holder
2) who gives value for an instrument
3) in good faith
4) without notice of certain things

Front 75

HDC: "value for the instrument"

Back 75

Look for consideration

- a mere promise to give value is not enough
- antecedent debt is ok
- can become a "partial HDC" (HDC for half the face amount of the instrument, normal holder for other half)

Front 76

Does a depositary bank become a holder "for value"?

Back 76

No, not when it provisionally credits depositor's account for a deposited check.

Yes, when it allows customer to withdraw against the credited amount on a first-in, first-out basis.

Front 77

HDC: "good faith"

Back 77

Honesty in fact & Observance of reasonable commercial standards of fair dealing

Front 78

"Honesty in Fact"

Back 78

subjective. What the holder knew.

Front 79

"Observance of Reasonable Commercial Standards of Fair Dealing"

Back 79

objective. Fairness of conduct as understood in the relevant community/industry.

Front 80

HDC: "without notice"

Back 80

HDC must take the instrument without notice (actual and reasonable) that:
1) instrument is so irregular/incomplete that authenticity is questionable
2) instrument is overdue or dishonored
3) instrument contains unauthorized signature or has been altered
4) there is a claim on the instrument
5) any party has a defense or a claim in recoupment on the instrument

Front 81

The HDC must take the instrument without actual or reasonable knowledge that the instrument is overdue or dishonored.

We are concerned with the ______ amount, not the ______.

Back 81

principal; interest

Front 82

The HDC must take the instrument without actual or reasonable knowledge that the instrument is overdue or dishonored.

A check becomes overdue when?

Back 82

90 days after its date

Front 83

HDC:

Notice of a party having a defense or a claim in recoupment (a counter-claim that reduces the amount payable) on the instrument.

Examples.

Back 83

Notice of Failure of Consideration
Notice of Breach of Warranty
Notice if Breach of Fiduciary Duty

Front 84

What does not constitute prohibited notice for HDC's?

Back 84

Notice that an instrument is antedated, undated, or postdated.

Notice of an incomplete instrument that has been property completed.

Notice of purchase at discount.

Front 85

A large discount alone does not constitute taking in bad faith. But, coupled with other suspicious circumstances, a large discount could give rise to:

Back 85

an argument that the person is taking the instrument in bad faith or with notice that someone else has a claim to that instrument

Front 86

The Shelter Rule

Back 86

an instrument's transferee acquires whatever rights her transferor had

Front 87

Real Defenses

Back 87

- infancy
- incapacity, duress, illegality of the transaction (narrow in scope)
- fraud in execution of an instrument
- any other discharge of which holder has notice when he takes the instrument
- statute of limitations

Front 88

Real Defenses:

SOL for a check

Back 88

3 years

Front 89

Real Defenses:

SOL for a note

Back 89

6 years

Front 90

Real Defenses:

When does SOL begin to run for a demand instrument?

Back 90

When demand is made

Front 91

Real Defenses

When does SOL begin to run for a time instrument?

Back 91

When payment is due

Front 92

Real Defenses:

Fraud in the execution ("fraud in the factum")

Back 92

Fraudulent behavior designed to get someone's signature on a negotiable instrument without them knowing or having a reasonable opportunity to discover that it is a negotiable instrument.

- look for excusable ignorance (can't read), tricked into what they actually are signing

Front 93

Real Defenses:

Discharge of which the holder has notice

Back 93

look for "VOID" etc.

Front 94

Terms of art for banks and customers

Back 94

Drawer = "Customer"

Drawee Bank = "Payor Bank"

Front 95

Properly Payable Rule

Back 95

Payor bank may pay out the customer's money only if it follows the customer's orders exactly. If it does not do so, it must recredit the customer's account.

Front 96

PPR?

A check with a forged drawer's signature.

Back 96

Not properly payable.

Forged signature, no authorization. Recredit account.

Front 97

PPR?

A check with a forged or missing indorsement.

Back 97

Not properly payable.

Given forged indorsement to order paper check, the person trying to get money was not the holder (entitled to get the money). Recredit account.

** look for BEARER PAPER **

Front 98

If an instrument is payable to payees jointly, what is necessary to make it properly payable?

Back 98

the signatures of all payees is necessary to negotiate or inforce in order to make it properly payable.

Front 99

If an instrument is payable to payees severally (to either X or Y), what is necessary to make it properly payable?

Back 99

any payee who is in possession of the instrument can negotiate or enforce the instrument

Front 100

PPR?

Where a check has been altered, the customer/drawer's account can only be paid:

Back 100

the original amount of the check

Front 101

PPR?

Payment over a customer's valid stop payment order.

Back 101

Not properly payable.

Front 102

A customer may stop payment of a check drawn on customer's account by an order to the drawee bank:

Back 102

1) describing the check with reasonably certainty and
2) the order must be received by the bank at a time and in a manner that affords the bank a reasonable opportunity to act on it

Front 103

A stop payment order is effective for ___ months, but it lapses after ____ calendar days if the original order was oral and was not confirmed in writing within that period.

Back 103

6; 14

Front 104

Can a bank contract out of liability for negligently failing to honor a valid stop payment order?

Back 104

No.

Front 105

The burden of establishing the fact and amount of loss resulting from the payment over a valid stop payment order is on ____.

Back 105

the customer

Front 106

A drawee bank ___ honor a check if it creates an overdraft.

Back 106

May. Does not have to honor, unless it has made an agreement with the customer.

Front 107

A bank is under no obligation to a customer to pay a check more than ___ months old, but it may change the account thereafter in good faith.

Back 107

6

Front 108

A payor bank is liable to its customer for damages caused by wrongful dishonor of a check. Liability is limited to:

Back 108

actual damages proved and may include damages for arrest or prosecution or other consequential damages.

Front 109

Forged Indorsement

Drawer > Payee > Thief > Grocery Store > Depositary Bank > Drawee Bank

If Payee sues Drawer for money (on drawer liability) or Drawee, Depositary, or anyone taking after thief (in conversion)...

Drawee Bank will end up being liable for the money.

How can Drawee Bank recover from the others?

Back 109

Drawee Bank may recover under presentment warranty liability

Front 110

Presentment Warranty Liability Rule

Back 110

1) it is a person entitled to enforce the check
2) the check has not been altered
3) it has no actual knowledge that the drawer's signature was forged

Front 111

Generally, the loss for a forged indorsement should pass to the ______

Back 111

earliest solvent person after the forger (or the forger case if she is solvent and locatable)

Front 112

Where a drawee bank pays a check with a forged drawer's signature, it can seek recovery from earlier transfers under breach of _________ that each of these earlier parties at the time of transfer _________. However, typically suffers a loss in forged drawer signature scenario.

Back 112

presentment warranty

had no actual knowledge that the drawer's signature was forged

Front 113

Ratification of a forged or unauthorized indorsement or a forged or unauthorized drawer/maker's signature occurs when a party

Back 113

with full knowledge of the forgery or lack of authorization accepts benefits thereof or actively assents in wrongful activity

Front 114

Does ratification cover alterations?

Back 114

Yes.

Front 115

Imposter Rule

Back 115

validates the forged indorsement of the payee's name where the maker/drawer has been duped by an imposter to issue the instrument; validation runs in favor of person who, in good faith, pays the instrument or takes it for value or for consideration

Front 116

Fictitious Payee Rules: If the maker of a note or the drawer of a check does not intend at the time that the instrument was issued for the person identified as the payee to have any interest in the instrument, then an indorsement in the name of the payee is

Back 116

effective in favor of the person who, in good faith, pays the instrument or takes it for value or for collection

Front 117

Fictitious Payee Rules: If the person identified in the instrument as the payee is fictitious, then an indorsement in the name of the payee is

Back 117

effective in favor of the person who, in good faith, pays the instrument or takes it for value or for collection

Front 118

Fraudulent Indorsement by an Employee Entrusted with Responsibility

Back 118

If an employer entrusts an employee with responsibility with respect to an instrument and the employee makes a fraudulent indorsement on the instrument, the indorsement is effective.

Front 119

The Negligence Rule

Back 119

If a person, by his negligence, substantially contributes to a material alteration or to the making of an unauthorized signature, he is precluded from asserting the alteration or lack of authority against an HDC or the drawer or other payor who pays in good faith and in accordance with reasonable commercial standards or the drawer or payor's business.

Front 120

Comparative Negligence

Back 120

If the drawee bank or other person paying the instrument or taking it for value or for collection fails to exercise ordinary care, the person bearing the loss may recover from the drawee bank or other person failing to exercise ordinary care to the extent the failure to exercise ordinary care contributed to the loss.

Front 121

Bank Statement Rule

Back 121

When a bank makes a bank statement available to his customer, the customer must use reasonable care and promptness to determine whether customer's (drawer's) signature was unauthorized on a check or if there was an alteration of a check, and must promptly notify bank with reasonable time (30 days). Otherwise, customer is liable.

Front 122

Alteration

Back 122

unauthorized change in an instrument that purports to modify the obligations of any party

nonfraudulent v. fraudulent

Front 123

Nonfraudulent Alteration

Back 123

Does not discharge any party and the instrument may be enforced according to its original terms

Front 124

Fraudulent Alteration

Back 124

Discharges every party obligated on the instrument unless a party assents to or is precluded from asserting the alteration

Front 125

Fraudulent Alteration of a Completed Note

Back 125

Full discharge

A person taking the altered instrument for value, in good faith without notice of the alteration may enforce it according to its original terms (recovers the rest from the alterer for breach of transfer warranty)

Front 126

Fraudulent Alteration of an Incomplete Note (filling in a blank with higher number)

Back 126

If holder has no notice and is therefore an HDC, he takes free of defense and can collect the altered amount from the maker

Front 127

Fraudulent Alteration of a Completed Check

Back 127

A payor bank paying a fraudulently altered check may properly pay the check according to its original terms

(then recover from bank presenting the check for breach of presentment warranty that check had not been altered)

Front 128

Fraudulent Alteration of an Incomplete Check

Back 128

Can charge the full, altered amount.

Front 129

Accommodation Party

Back 129

one who signs the instrument in any capacity for the purpose of lending his name and credit for the benefit of another party to the same instrument (i.e. guaranteeing a loan)

Front 130

Accommodation Party Liability

Back 130

Liable in the capacity in which he signed (indorser - back of check; co-maker - front of check)

if indorser, obligation to pay is conditional on honor/dishonor

if maker, obligation to pay is not conditioned on honor/dishonor

Front 131

"Collection Guaranteed"

Back 131

Dealer (person owed money) must first collect from co-maker who is not accommodation party

Normally Dealer could collect from either

Front 132

An accommodation party that pays the holder on the instrument is entitled to ________ from the accommodated party.

Back 132

reimbursement

Front 133

An accommodation party has all defenses __________

Back 133

normally associated with the capacity in which he signed the instrument

Front 134

In addition to his own defense, the accommodation party can assert _______________

Back 134

any defense (real or personal) that the accommodated party could assert against the holder except defenses of discharge in bankruptcy, infancy, lack of legal capacity, and the accommodated party's discharge by cancellation or renunciation

Front 135

Suretyship defenses: If a person entitled to enforce an instrument without gaining consent of accommodation party does any of the following actions, the accommodation party's obligation to pay is discharged to the extent of his loss:

Back 135

1) an extension of time on the note
2) any other material modification of obligation unless creditor/dealer can show accommodation party did not suffer loss
3) impairment of collateral securing the obligation

Front 136

Can suretyship defenses be waived in an instrument?

Back 136

Yes

Front 137

An accommodation party can assert suretyship defenses only against a party who has

Back 137

notice of the acccommodation

Front 138

HDC will strip the accommodation party's and the accommodated parties' ____________

Back 138

personal defenses

Front 139

Dealer's release of accommodated party's payment obligation _____ discharge accommodation party's payment obligation.

Back 139

does not; but accommodation party can still retain right of reimbursement from accommodated party

Front 140

Accord and Satisfaction: General Rule

Back 140

If a person cashes or deposits an instrument with notice that t iis tendered in full payment of a disputed debt, the debt is discharged in full.

Front 141

Requirement for Accord and Satisfaction

Back 141

1) person tendering must act in good faith
2) debt must be unliquidated or subject to a bona fide dispute
3) person tendering instrument must prove either: a) instrument contained conspicuous statement that it was tendered in full satisfaction of debt OR b) person accepting it actually knew that it was tendered in full satisfaction of the debt
4) organization may designate a person or office to which such checks must be sent
5) if person cashing check did not have actual notice that the check was tendered in full satisfaction of the debt, they can avoid discharge by tendering repayment of the check amount w/in 90 days