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16 Cards in this Set
- Front
- Back
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Promissory note: parties |
Maker = debtor
Payee = lender/creditor |
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Draft: parties
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Drawer = signer
Drawee = signer's bank (usually) Payee |
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Check: special conditions
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Must be drawn on a bank
Must be payable on demand |
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Trade acceptance: parties
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Drawer = seller
Drawee = buyer Payee = seller (usually) |
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6 requirements of negotiable instrument
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1) In writing, signed by maker/drawer
2) Unconditional promise or order to pay 3) Sum certain in money 4) Payable at a definite time or on demand 5) Payable to order or bearer 6) No other obligation or promise; must not incorporate terms outside the instrument |
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What makes possessor of instrument a holder?
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Properly negotiated (usually endorsed)
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Types of endorsements
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Special: specifies person to whom instrument is transferred
Blank: makes instrument a bearer instrument (usually a signature) Qualified: preceded by "without recourse"; releases endorser from liability for payment Restrictive: conditional, e.g. "for collection," "for deposit," "pay any bank" |
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Requirements for holder to be a holder in due course
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Good faith (HDC is honest)
For value (HDC must provide consideration; past consideration OK) Without notice of any problems (overdue, dishonored, any defenses, etc.) |
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Shelter provision
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One who acquires instrument from HDC can assert rights of HDC even if not himself an HDC
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Rights of HDC
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Takes free of personal (but not real) defenses
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Types of contractual liability:
Definition? Who is liable? |
Primary: promise to pay any holder; maker or drawee is liable
Secondary: promise to pay if maker or drawee does not pay; drawer or endorser is liable |
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Warranties upon presentation or transfer of instrument
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Good title
All signatures are genuine or authorized No known defenses |
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Bearer vs. order paper: method of transfer
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Bearer paper need only be delivered
Order paper must be delivered and endorsed |
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Real defenses
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Forgery
Fraud in the execution Material alteration Infancy/incapacity/illegality Extreme duress Discharge in bankruptcy |
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Personal defenses
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Breach of contract
Lack of consideration Theft of instrument Fraud in the inducement Simple duress Discharge of obligation w/o proper notice to others |
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Liability of transferor if no endorsement
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No contract liability
Warranty liability only to immediate transferee |
