Commercial Papers

Front 1

What Article is cited in the commercial papers exam?

Back 1

Article 3

Front 2

What are the three fact patterns that are typically tested?

Back 2

1. Good-faith purchaser v. Obligor
2. GFP v. True Owner
3. Transferee v. True Owner

Front 3

What is the typical scenario for a GFP v. Obligor

Back 3

The GFP bought the instrument and has demanded payment from the maker or drawer. The maker or drawer has refused and the GFP has brought suit.

Front 4

What is typical scenario in a GFP v. True Owner case?

Back 4

The instrument is lost or stolen and later purchased by a GFP.

Front 5

What is typical scenario for a Transferee v. Transferor case?

Back 5

A transfer after the instrument is drafted and the transferee brings suit against the transferor.

Front 6

What are the components of a promissory note?

Back 6

A maker makes an affirmative promise to pay to the order of a payee.

Front 7

What are the components of a draft?

Back 7

A drawer orders a drawee to pay to the order of the payee.

Front 8

What are the requirements for a Negotiable Instrument?

Back 8

WOSSUPP:
1. a WRITING
2. payable to ORDER or bearer,
3. SIGNED by the maker or drawer,
4. for a SUM certain,
5. UNCONDITIONAL PROMISE except for those allowed by Article 3,
4. PAYABLE on demand or at a definite time.

Another memory device: think of the front of a check.

Front 9

What is the implication of a finding that the instrument is negotiable?

Back 9

The maker or drawer is deprived of the typical contract defenses.

Front 10

What are the two theories that a defendant holding a negotiable instrument could be sued on?

Back 10

Contract or Signature Liability

Front 11

What is the distinction between 'to order' and 'to bearer.'

Back 11

'To bearer' does not state a specific person. 'To order' names a person that is authorized to order the demand for payment.

Front 12

What facts lead to suing on signature liability?

Back 12

When a person signs a negotiable instrument and doesn't pay the money owed.

Front 13

Is an agent who signs on behalf of a principal liable?

Back 13

Yes, if:
1. not authorized
2. ambiguous as to representative capacity; or
3. represented person is not identified on the instrument.

Thus, the agent should verify that the represented person is identified on the instrument, is authorized, and should not be ambiguous as to representative capacity.

Front 14

What does "without recourse" mean?

Back 14

It's when an indorser/drawer disclaims signature liability

Front 15

What warranties run with a negotiable instrument? (5)

Back 15

1)That plaintiff will have good title

Front 16

Who has standing to sue for breach of warranty?

Back 16

1) If defendant INDORSED instrument anyone in possession of instrument

Front 17

2) If no indorsement

Back 17

only immediate transferee

Front 18

How is a payable to order negotiable instrument duly negotiated?

Back 18

If to specific payee

Front 19

What does a payable to bearer negotiable instrument require?

Back 19

NOTHING!

Front 20

What are the three types of indorsements?

Back 20

1) Special

Front 21

What does a special indorsement contain?

Back 21

A signature on the back of indorsee

Front 22

What is a blank endorsement?

Back 22

Nothing -- negotiation occurs through delivery alone

Front 23

What's a restrictive indorsement and what is its consequence?

Back 23

Indorsement that contains condition ("for deposit only"). If a bank other than payee's cashes it

Front 24

What is an HDC?

Back 24

HDC means holder in due course. It is a special kind of good faith purchaser of an instrument.

Front 25

How does a transferee qualify as a holder in due course?

Back 25

Person who takes instrument:
1. for value
2. In good faith, and
3. without notice

Front 26

Without what notice must a HDC take the intrument?

Back 26

a. overdue, dishonored, or accrued default of payment on another instrument
b. unauthorized signature or alteration, and
c. of any defense of claim to it by any person.

Front 27

What is value?

Back 27

It is not CONSIDERATION. A "promise" is not value

Front 28

How is good faith measured?

Back 28

Both a subjective and objective standard?

Front 29

How is overdue

Back 29

dishonored

Front 30

When is an instrument overdue and therefore disqualifies holder as HDC?

Back 30

An instrument bought AFTER the instrument was payable

Front 31

When will an instrument have notice that its subject to a defense or claim

Back 31

If says PAID/VOID

Front 32

Actual knowledge of fraud

Back 32

stolen

Front 33

What is the shelter rule?

Back 33

Transferee acquires whatever rights transferor had.

Front 34

What defenses are NOT available to a holder in due course?

Back 34

Real Defenses (MAD FIFI4)

Front 35

What is the properly payable rule?

Back 35

Drawee bank that honors forged check must recredit owner's account as long as DRAWER not negligent

Front 36

What is negligent under the properly payable rule?

Back 36

1) If an employee in charge of checks for an employer forges employer deemed negligent

Front 37

2) Imposter Rule -- If imposter induces drawer to write check to imposter

Back 37

negligent

Front 38

What is bank statement rule?

Back 38

Customer must report wrongdoing within 30 days of receipt of bank statement in order to get benefit of Properly Payable Rule

Front 39

If there is a conflict between the written part and numerals what prevails?

Back 39

The WRITTEN words

Front 40

What is the procedure for a commercial paper problem

Back 40

1) Is the instrument a negotiable instrument? (WOSSUPP)