• Shuffle
    Toggle On
    Toggle Off
  • Alphabetize
    Toggle On
    Toggle Off
  • Front First
    Toggle On
    Toggle Off
  • Both Sides
    Toggle On
    Toggle Off
  • Read
    Toggle On
    Toggle Off
Reading...
Front

How to study your flashcards.

Right/Left arrow keys: Navigate between flashcards.right arrow keyleft arrow key

Up/Down arrow keys: Flip the card between the front and back.down keyup key

H key: Show hint (3rd side).h key

A key: Read text to speech.a key

image

Play button

image

Play button

image

Progress

1/6

Click to flip

6 Cards in this Set

  • Front
  • Back
Opening Argument
Commercial paper is governed by the Washington statute implementing UCC Article 3. Banks and customer relations are governed by the Washington statute implementing UCC Article 4.
Negotiability
• For an instrument to be negotiable, it must have (1) negotiable words such as “pay to the order of,” (2) an unconditional promise to pay with no other undertaking, (3) a time certain for payment, (4) a sum certain for payment, and (5)signed by the maker. Three party commercial paper (checks) has (1) drawer/payor, (2) a drawee bank, and (3) payee. Two party commercial paper (notes, etc) has (1) maker/payor and (2) payee.
Holder in Due Course (HDC)
• To facilitate commerce, a HDC has greater rights than a mere assignee. Personal defenses are not valid against an HDC. To be an HDC, a person must take the instrument (1) for value (2) in good faith (3) with no notice of imperfections and (4) instrument must be properly negotiated. If one does not qualify as a HDC (take as a gift, for example), he may still be a HDC under the Shelter Rule, if there is an HDC up the chain who passes HDC status by assignment.
Real defenses
• Real defenses from execution of the NI are good against a HDC including (1) fraud in the execution (2) illegality (2) discharge in bankruptcy (3) duress (4) lack of capacity (5) statute of limitations (6) forgery (7) unauthorized signature and material alteration. The last three may be recharacterized as personal defenses if the maker/drawer’s or indorser’s negligence contributed to the defense.
Personal defenses
• Personal defenses from the underlying contract are not good against a HDC, but may be asserted against the payee: (1) mutual mistake (2) unauthorized completion (2) incompletion of a condition precedent (3) fraud in the inducement (4) failure of consideration and (5) other claims.
Liability
• The maker has primary liability on any instrument he issues. Indorsers have secondary liability and make certain warranties to their transferees. Transferors warrant that (1) they have good title (2) material alterations are not present (3) no knowledge of maker’s insolvency (4) no defenses may be asserted against warrantor and (5) all signatures are genuine and authorized. Presenters to the drawee bank warrant that (1) they have good title (2) material alterations are not present and (3) the drawer’s signature is authorized.