Holder Vs Maker (Drawer)

Front 1

Holder in Due Course/Holder

Back 1

Possession and Good title (free of forgeries or missing signatures of payee and any specially indorsees; properly0 negotiated

Front 2

Holder in Due Course/Holder/ IMPORTANT

Back 2

If the instrument contains forged endorsement, it has not been properly negotiated. No party who takes an instrument with a forged endorsement can become a holder or holder in due course because negotiation was improper.

Front 3

Holder in Due Course/Due Course

Back 3

1) For Value
2) In good faith: In good faith means honesty in fact and observance of reasonable commercial standards of fair dealing
3) without knowledge or notice (of alteration, unauthorized signature, overdueness, dishonor, defenses, irregularity).

Front 4

Exception

Back 4

Transactions precluding HDC status.
1) Purchasing instrument at a judicial sale.
2) Acquiring instrument by taking over an estate.
3) Purchasing instrument as part of a bulk transaction not in the regular course of business

Front 5

Claims and Defenses

Back 5

A HDC takes an instrument free from personal defenses and ownership claims, but subject to real defenses

Front 6

Claims and Defenses/ FFAIIDDSS/ FFAII

Back 6

1) Forgery
2) Fraud in the factum (real fraud or switched document)
3) Alteration (material)
4) Incapicity (infancy, adjudicated insanity)
5) Illegality (note may still be enforceable but only according to legal terms.

Front 7

Claims and Defenses/FFAIIDDSS/ DDS

Back 7

6) Duresss
7) Discharge in insolvency, discharge with notice
8) Suretyship with notice (HDC knows a prior party signed instruments as a surety).

Front 8

Claims and Defenses/FFAIIDDSS/ S

Back 8

9) Statute of limitation
a)an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within 6 years after the due date.
b) An action to enforce the obligation of a party to pay a note payable on demands must be commenced within 6 years after the demand. IF no demand for payment is made to the maker, an action must be commenced within 10 years.
c) An action to enforce the obligation of a party to an unaccepted draft (check) must be commenced within 3 years after dishonor of the draft or 3 years after the date of the draft, whichever period expires first.

Front 9

Personal Claims and Defenses

Back 9

All claims and defenses other than real defenses, including defenses and claims available in ordinary contract actions and claims in recoupment

Front 10

Exception; Shelter rule

Back 10

A transferee acquires whatever rights her transferor enjoy, taking shelter in the status of her transferor. 1) HDC rights.
2) Limitation: the shelter rule does not apply if the transferee is a party to fraud or illegality affecting the instrument.

Front 11

Exception: Federal Trade Commission

Back 11

To protect consumers, the FTC promulgated a regulation that preserves consumers' personal claims and defenses vis a vis a HDC.

The holder of a note must honor warranties of the original sellers.

Buying TV from best buy on credit, bank that loans $ must honor consumer rights found within best buy.