Ucc 3/4

Front 1

Negotiable Instrument

Back 1

A negotiable instrument is a writing which is signed and contains an unconditional promise or order to pay a fixed amount of money, payable to order or bearer at a definite time or on demand and does not state any other undertakings in addition to payment of money.

Front 2

Holder

Back 2

A holder is entitled to enforce the instrument and is a person in possession of bearer paper or in in possession of order paper, if the possessor is the identified person. (A holder is subject to both personal and real defenses.)

Front 3

Holder in Due Course

Back 3

A holder in due course is a holder who gave value for the instrument, in good faith and without notice of overdueness, dishonor, claims, or defenses. An HDC takes free of all claims and personal defenses.

Front 4

Optional Presentment Rule

Back 4

The optional presentment rule provides that a time instrument (payable at a definite time) may be presented for acceptance (not payment) before its due date, and a refusal by the drawee to accept/certify it may be treated as a dishonor.

Front 5

Obligation of Indorser

Back 5

The obligation of the indorser is to pay on presentment, dishonor and notice. Obligation is discharged 30 days after indorsement.

Front 6

Transfer Warranties (STEAK)

Back 6

Transfer warranties are given by a transferor for consideration who warrants, among other things, that:
* Signatures are genuine
* there are no good defenses good against him, the Transferor
* Entitled to enforce
* no Alterations
* no Knowledge of any insolvency of the drawer

Front 7

Presentment Warranties (AKE)

Back 7

Presentment warranties are given to the drawee by a presenting party and all prior transferors (regardless of indorsement), and include that:
* no Alterations
* no Knowledge of any insolvency of the drawer
* Entitled to enforce

Front 8

Underlying Contract Liability

Back 8

Underlying contract liability may lie where an instrument has been dishonored.

Front 9

Forgery Rule

Back 9

The forgery rule, generally, provides that a forged signature is not effective as the signature of the person whose name is forged. However, exceptions permit a forged indorsement to be effective: 4 FINE forgeries.

Front 10

Fictitious Payee Rule

Back 10

The fictitious payee rule allows the forgery to be treated as effective as the signature of the person whose signature was forged when the payee is a nonexistent person, or a payee is an existing person but the drawer's intent is that the named payee does not get the money. In this case, any person in possession of the instrument is a holder.

Front 11

Impostor Rule

Back 11

The impostor rule allows the forgery to be treated as effective as the signature of the person whose signature was forged when an impostor induces the issuer to issue the instrument to the impostor with the person impersonated as the named payee.

Front 12

Negligence Substantially Contributing to Forgery

Back 12

The negligence substantially contributing to forgery rule provides that a party whose negligence substantially contributed to a forgery is estopped from denying the validity of the forged signature against a person who takes the instrument in good faith for value.

Front 13

Entrusted Employee's Fraudulent Indorsement Rule

Back 13

The entrusted employee's fraudulent indorsement rule allows a forgery to be treated as the signature of the person whose signatured was forged when an entrusted/authorized employee fraudulently indorses the instrument in the name of the employer.

Front 14

Comparative Negligence (Forgeries)

Back 14

If the transferee is also negligent in handling the instrument and that negligence substantially contributes to the loss, loss is apportioned according to relative fault between the negligent parties.

Front 15

Properly Payable Liability

Back 15

The properly payable rule permits a bank to charge a customer's account for an instrument when authorized by the customer.

Front 16

Payee Identified

Back 16

The payee is the person identified by the issuer of the instrument.

Front 17

Depositary Bank Holder of Unindorsed Item

Back 17

The depository bank becomes a holder of an item when it receives the item for collection if the customer was a holder at the time of delivery, whether not the customer indorses the item.

Front 18

Obligation of Drawer

Back 18

The obligation of a drawer is to pay the instrument upon dishonor by the drawee (if a bank). If not a bank, drawer liable only after presentment, dishonor and notice of dishonor.

Front 19

Dishonor

Back 19

A dishonor occurs when the drawee refuses to pay the instrument after a presentment for payment.

Front 20

Right to Demand Adequate ID

Back 20

A drawee has the right to demand adequate id before paying/cashing a check and failure to do so will be treated as if the instrument was not presented.

Front 21

Acceptance

Back 21

Acceptance is the drawee's signed agreement to pay the instrument when presented, and only becomes effective when notice is given by the drawee.

Front 22

Lost or Stolen Instrument

Back 22

If instrument is lost or stolen, a person can enforce the instrument (like a holder) if the person provides an affidavit proving that the person is not now in possession, that s/he was a holder, and describing the terms of the instrument. (Posting of bond may be required to protect drawee/issuer from double payment.)

Front 23

Lost or Stolen Cashier's/Teller's/Certified Check

Back 23

If the Cashier's/Teller's/Certified Check is lost or stolen, the claimant must complete a declaration of loss form, and the bank must pay claimant if no holder appears within 90 days. Afterward, if an HDC appears, claimant, not the bank, is liable to HDC.

Front 24

Overdueness

Back 24

Notice of overdueness includes taking a check 90 days after date, taking time instruments after its due date, or after an unreasonable time for other demand instruments, and will render a holder not an HDC (since on notice).

Front 25

Shelter Doctrine

Back 25

The shelter doctrine gives a non-holder who is in possession the rights of a holder/HDC in the instance that the transferor merely forgets to indorse, unless the transferee is engaged in fraud or illegality re: instrument.

Front 26

Types of Liability: "Only With Focus, Can People Understand Liability"

Back 26

Obligation on the instrument
Warranty liability
Final Payment/Payment by Mistake Rule
Conversion
Properly Payable
Underlying Contract

Front 27

Obligation on the Instrument - Different Parties

Back 27

Maker - primary liability
Drawer - secondary liability
Indorser - secondary liability
Acceptor - primary liability
Accommodation Party - liability in capacity signed

Front 28

Presentment

Back 28

A presentment is a demand to be paid or for acceptance/certification of the instrument.

Front 29

Dishonor

Back 29

A dishonor is a refusal to pay or accept.

Front 30

Notice of Dishonor

Back 30

Notice of the dishonor to the obligated party who signed is a condition of indorser's and sometimes drawer's obligation.

Front 31

Excused Presentment, Dishonor and Notice of Dishonor

Back 31

A stop order issued excuses requirement of presentment, dishonor and notice of dishonor.

Front 32

Obligation of the Drawee

Back 32

There is no obligation of a drawee unless the drawee accepts the instrument.

Front 33

Final Payment Rule/Payment by Mistake and Exception

Back 33

If a party makes a final payment or acceptance by mistake, the party can recover the money or revoke acceptance, but must do so by midnight of next business day. However, final payment or acceptance to an HDC is final and money cannot be recovered.

Front 34

Forgery (a crime)

Back 34

A forgery is falsely creating or altering a legal document with the specific intent to defraud.

Front 35

Uttering (a crime)

Back 35

Uttering is knowingly offering a forged instrument as genuine with specific intent to defraud.

Front 36

False Pretenses (Theft - a crime)

Back 36

False pretenses is obtaining title to the property of another by knowingly making a false representation of fact which causes the victim to pass title with the specific intent to defraud.