Commercial Paper - Indiana Bar Exam

Front 1

What are the four (4) key concepts in Commercial Paper?

Back 1

1. Equivalent of Gold

2. Transferability

3. Protection of the Innocent (HDC).

4. Bank Collection Process (Article 4).

Front 2

What are the eight (8) Requirements of a Negotiable Instrument?

Back 2

1. Writing

2. Signed By Maker or Drawer

3. Unconditional

4. Promise to Pay or Order to Pay

5. Fixed Amount

6. No Other Instructions

7. Payable on Demand (or in definite time)

8. Made Payable "To Order" or "To Bearer"

Front 3

Bearer Paper: Does the transfer have to be voluntary?

Back 3

No.

- Even a thief can be a "holder" of bearer paper.

Front 4

Holder in Due Course: What are the four (4) elements of a HDC?

Back 4

1. a holder

2. who gives value

3. in good faith

4. without notice of claims or defenses.

Front 5

Holder in Due Course: What is a HDC analogous to?

Back 5

- a good faith purchaser for value.

Front 6

HDC: What meets the "holder" requirement?

Back 6

Bearer Paper = Possession

Order Paper = Possession + Endorsement

Front 7

HDC: What are the five (5) claims / defenses that an HDC must have "no notice" about?

Back 7

The Instrument is...

1. not authentic

2. overdue

3. material alteration,

4. already claimed, or

5. recoupment

Front 8

HDC: What does the "Shelter Rule" allow someone who is not an HDC to do?

Back 8

- It allows them to elevate their status to HDC, if they are in the chain from a valid HDC.

Front 9

HDC: What are the four (4) "Real Defenses" that an HDC takes subject to?

Back 9

1. Infancy

2. Incapacity, Duress, or Illegality

3. Fraud in the Factum

4. Discharge by Insolvency

Front 10

What is the "Properly Payable" Rule?

Back 10

- The bank may pay out the customer's money, ONLY if they have followed his instructions exactly.

- If not, they must re-credit the customer's account.

Front 11

Is a forged or missing signature properly payable?

Back 11

No.

Front 12

What are the (3) "Presentment Warranties"?

Back 12

1. Entitled to enforce,

2. No alterations, and

3. Signature is Authorized.

Front 13

What are the 4"Transfer Warranties"?

Back 13

1. the transferor is entitled to enforce the instrument,

2. no alterations,

3. all signatures are authentic,

4. Not subject to any defense or claim in recoupment.

Front 14

What is the "Negligence Rule"?

Back 14

- If a party, by his negligence, substantially contributes to a material alteration or unauthorized signature, he is precluded from raising defenses against someone who pays in good faith.

Front 15

Does a customer have a duty to examine bank statements?

Back 15

Yes. He must also "promptly notice" the bank to any problems if he wants to recover.

Front 16

What is an "accommodation maker"?

Back 16

Basically a co-signor.