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10 Cards in this Set

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  • Back

What are the two requirements for a holder to enforce a lost instrument?

  1. must prove the terms of the instrument and entitlement to enforce it, including that s/he was holder when instrument lost/stolen, and not negotiated/transferred; AND
  2. maker gets “adequate protection” against someone else coming forward.

What defenses can the maker/drawer generally assert?

So long as not HIDC

defenses based on underlying obligation:

  • e.g., promised payment in exchange for consideration (goods or services) that was never delivered,
  • instrument issued as a result of fraud,
  • discharge by performance through payment to an earlier holder of the note already.

What are the four requirements to be a Holder in Due Course?

  1. Holder;
  2. acquired instrument for value (not future promises);
  3. good faith; and
  4. w/o notice of (a) overdue, dishonored, or principal payment default, (b) forged or altered, (c) third party claim to instrument, or (d) drawer/maker has defense to payment;

What does it mean that a Holder in Dues Course does not have Notice? (4)

Does not have notice of:

  1. overdue, dishonored, or principal payment default,
  2. forged or altered,
  3. third party claim to instrument, or
  4. drawer/maker has defense to payment;

What are the four defenses that can be asserted against a Holder in Due Course?

Only Real Defenses

  1. Infancy of maker/drawer;
  2. Duress, incapacity, or illegality of debt if renders underlying contract void;
  3. Fraud in factum where maker did not know/have reason to know signed paper was instrument; and
  4. Discharge in bankruptcy of debt

What are the three requirements to make an indorser liable?

  1. Dishonored by bank
  2. Timely Notice of dishonor
  3. no waiver (no indorsement w/“without recourse”)

How can an indorser eliminate liability?

Writing "without recourse"

What is a transfer warranty?

Warranties given to any future holder when indorser transfers instrument for value

What are the five Transfer Warranties?

  1. transferor entitled to enforce;
  2. all signatures authentic/authorized;
  3. not altered;
  4. (iv) not subject to any defense/claim against transferor; and
  5. no knowledge that maker/drawer initiated bankruptcy

When may an indorser waive transfer warranties?

only notes, not checks