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14 Cards in this Set
- Front
- Back
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order definition |
-check
-3 parties: bank account holder [drawer] orders bank [payor bank or drawee] to pay payee
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cashier's check definition |
drawer and drawee are same person [bank] |
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promise definition |
promissory note
-maker promises to pay someone [payee] for money in the future |
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8 requirements for an instrument to be negotiable |
WUT Fck Weak Dicked Emotional Noobs 1) written and signed 2) unconditional 3) transfers money 4) fixed amount 5) words of negotiation [to bearer, blank; to order of or to order] 6) definite time or on demand 7) no extraneous undertakings 8) no conspicuous non-negotiation language
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2 effects of issuance |
1) if payee accepts instrument, underlying obligation is suspended until the instrument is paid or is dishonored [debt reinstated]
2) accord and satisfaction: can be used to settle a disputed debt if 3 things a) debtor acts in GF b) instrument says FULL SATISFACTION c) recipient accepts payment and does not refund in 90 days
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holder definition |
must be 1) in possession when instrument first negotiated 2) for bearer paper [to bearer or blank] OR order paper [to order of X or X or order] |
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how does a holder negotiate bearer paper? |
simply has possession
-can be stolen, lost, etc. |
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how does a holder negotiate order paper? |
-possession + indorsement
1) blank indorsement: just a signature -turns order paper into bearer paper
2) special indorsement: signs + instructions to bank [to order of X next] -stays order paper and turns bearer into order
3) restrictive indorsement: signs + "for deposit only"
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anomalous indorsements |
assume that the party signed as a surety |
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2 protections for accomodation parties |
1) release: in IL, release of the principal obligor does NOT release accomodation parties
2) changes: modification, extension of time, impairment of collateral: discharges a non-consenting accomodation party to the extent of their loss |
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3 problems when enforcing instruments |
1) lost or stolen instruments: can be enforced if a) holder proves by other evidence the terms of the intsrument AND entitlement to enforce it
2) defenses to payment if not HIDC -maker/drawer can assert defenses
3) HIDC Tempting Virgins Get Wet -taken as holder -for value -in GF -without notice of infirmities |
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4 common types of infirmities HIDC cannot have notice of |
1) instrument is overdue, dishonored, or principal default
2) instrument has a forged signature or alteration
3) someone has a claim to the instrument
4) any drawer/maker has a defense to payment |
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shelter principle |
anyone who takes a voluntary transfer of a negotiable instrument gets all the rights of a HIDC if took from a HIDC |
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4 real defenses to HIDC |
1) infancy in drawer/maker 2) illegality of underlying debt 3) fraud in the factum: defrauded as to nature of instrument AND no reasonable opportunity to disabuse 4) discharged in bankruptcy |
