Commercial Paper -- Article 3

Front 1

Requirements for Negotiable Intrument

Back 1

(1) Writing;
(2) Payable to Order/Assigns or Bearer;
(3) Signed by Marker or Drawer;
(4) Reciting a Sum Certain;
(5) Containing an Unconditional promise or order w/ no additional promises or orders;
(6) Payable on Demand or at a Definite Time;
(7) Payable in Currency

Hint 1

WOSSUPP

Front 2

When is it Conditional?

Back 2

(1) Express Conditions;
(2) Governed by or subject to another agreement;
(3) Limits payment to a particular source or fund

Front 3

What happens if silent as to time of payment?

Back 3

Default = still payable on demand

Front 4

Does interest need to be defined?

Back 4

No. Can be ascertained from court judgment rights or announced major rate like LIBOR

Front 5

Who is the Maker?

Back 5

Person who promises to pay

Front 6

Who is the Drawer?

Back 6

Person who gives the order or command to the drawee to pay the payee

Front 7

Signature Liability

Back 7

If you sign it, you promise to pay.

Can be disclaimed by an Indorser or Drawer (but not maker) by saying "without recourse"

Front 8

Warranty Liability Triggers

Back 8

Triggered if you SELL the negotiable instrument
If you indorsed, any P in POSSESSION can sue you.
If you didn't indorse, onl your immediate transferee can sue you

Front 9

What are the Warranties in Warranty Liability

Back 9

a) P has good title to the instrument
b) All signatures are genuine and authorized;
c) Instrument hasn’t been materially altered;
d) No defense or claim is good against the D => instrument is enforceable;
e) D has no knowledge of any bankruptcy or insolvency action against the maker / drawer

Front 10

Due Negotiation if Payable to Order

Back 10

(1) Deliver to that payee;
(2) Further negotiation requires the payee INDORSE the instrument and deliver it to transferee

Front 11

Special Indorsement

Back 11

names particular person as indorsee who MUST SIGN IT for it to be further negotiated by him

Front 12

Blank Indorsement

Back 12

if doesn't name particular indorsee, can be negotiated by deliver alone.

Front 13

Requirements for Holder in Due Course

Back 13

Holder takes instrument
(1) For Value,
(2) In Good Faith;
(3) Without Notice that it's Overdue, Dishonored, or Subject to any Defense or Claim

Without Notice is an objective test: know or HAVE REASON TO KNOW of the problem (except actual knowledge of the breach is required for transfer in breach of fiduciary duty)

Front 14

Shelter Rule?

Back 14

Transferee steps into shoes of transferor…so you're golden if transferor was a HDC

Front 15

Does Interest arrears = Overdue?

Back 15

No. Can still be a HDC

Front 16

Benefits of HDC

Back 16

Take free from Claims (superior ownership) and Personal Defenses
Lack of consideration
Unconscionability
Waiver
Estoppel
Fraud in the Inducement

Front 17

Real Defenses

Back 17

Material Alteration
Duress
Fraud in the Factum
Incapacity
Illegality
Infancy
Insolvency

Hint 17

MadFifI4