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5 Cards in this Set
- Front
- Back
- 3rd side (hint)
***Negotiation***
Maker/drawer/buyer -- issuance/negotiable?--> payee/seller ----transfer/negotiation? ---> holder/bank or finance company |
Negotiation: transfer of negotiable instrument so transferee is a holder
Payee transfers the instrument to a third party rather than just getting the money (e.g., as payment for sale, to donee as gift, to bank to deposit in payee's account, etc.) |
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Holder Status Requirements:
1) Possession of negotiable instruments; and 2) Good Title |
Method of obtaining good title depends on words of negotiability used:
a) bearer- possession alone gives you said title b) order - possession plus necessity indorsements |
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Indorsements- Generally
Signature on a negotiable instrument by someone other than the maker, drawer, or acceptor normally on the bank of the instrument |
Blank Indorsements
1) How done: Payee's signature only Simplest type of indorsement consisting only of payee's signature (i.e., no particular person is named to whom instrument is now payable) 2) Effect: creates bearer paper. (Thus, further negotiations may be by transfer of possession alone; anyone in possession can cash it) |
Special Indorsements
1) How done: payee's signature plus designation of new person to whom instrument payable 2) Effect: creates order paper [thus, further negotiations will require indorsement of person to whom it was made payable] |
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For Deposit or Collection
Restrictive indoresement limiting what may be done w/the instrument. - if doesn't comply with indorsement, liable for conversion |
Identification of Person to whom Instrument Payable (the Payee)
1) Issuer's Intent determines initial payee 2) Multiple Payees - "and" separates names of payees [requires both (all) payees to indorse] - "or" or "and/or" separates names of the payees [requires any one of the payees] |
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Other Indorsement Issues
1. Transferee's Right to Transferor's Indorsement - if instrument is transferred for value, transferee has specifically enforceable right to transferor's indorsement |
2) Depository Bank Becomes Holder Even w/o Transferee's Signature
- depositary bank becomes a holder even if payee deposits check in payee's account w/o indorsing it |
3) Misspelled Payee's Name: Payee May Indorse w/Incorrect Name
4) Payee Lacking Capacity May Effectively Indorse - negotiation is effective even if payee was a minor, incompetent, under undue influence or fraud |