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14 Cards in this Set

  • Front
  • Back
What are the two types of negotiable instruments?
1. promissory note - contains affirmative promise to pay
2. draft - contains order or command to pay
Who are the parties to a promissory note?
1. The Maker: promisor
2. The Payee: Promisee
Who are the parties to a draft?
1. The Drawer: the person commanding payment
2. The Drawee: person ordered to do paying
3. The Payee: beneficiary of the order
Who is the indorser?
Person who signs the back of the check
When is a writing a negotiable instrument?
1. writing
2. order - payable to order or bearer
3. signed - by maker or drawer
4. sum certain - specifically ascertainable sum
5. un-negotiable promise and no additional promises
6. Payable on demand or at definite time
6. payable in currence
What is contract or signature liability?
Here, maker or drawer can be sued since signed the check. If there is an indorser, made promise to pay if the payment not made and he is notified so will be secondarily liable.
What is the purpose of including the words "without recourse" by signature?
term of art used by indorsers and drawers to disclaim contract liability
What is warranty or transfer liability?
Here, could be liable if transferor that received value for transfer.
Liability attaches IF:
1. If D indorsed instrument any plaintiff in posession may sue
2. IF D did not indorse, only original transferee may sue
What are the five warranties made by a defendant?
1. plaintiff has good title to the instrument
2. all signatures are genuine and authorized
3. D promises that instrument has not been materially altered
4. That no defense or claim good against D
5. No knowledge of any bankrutpcy or insolvency on part of maker or drawer
What is due negotiation?
means proper transfer of instrument
What is due negotiation where instrument is payable to order?
1. when payable to order of specific payee, negotiated by delivery of instrument to payee. If further negotiation, payee must indorse and deliver to transferee
2. when payable to bearer. No indorsement necessary, can cash it and next person is then a holder.
What are the types of indorsement?
1. The Special Indorsement: one that names particular person as indorsee
2. Blank Indorsement: does not name specific payee so delivery enough for negotiation
3. Restrictive Indorsement: contains restriction that must be followed or transferee liable for conversion.
What are requirements to be a holder in due course
1. paid value
2. took in good faith
3. without notice that instrument was overdue, had been dishonered, or subject to any claim or defense
NOTE: if transferor was fiduciary, this is an ACTUAL notice requirement
Shelter rule
If a transferee takes from a holder in due course, takes shelter in status and only subject to the Real Defenses and free from claim and personal defenses