2015 - Mee - Commercial Paper - Enforcement Of Negotiable Instruments

Front 1

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

Back 1

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.
   

Front 2

What defenses can the maker/drawer generally assert?

Back 2

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.

Front 3

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

Back 3

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;

Front 4

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

Back 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;

Front 5

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

Back 5

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

Front 6

What are the three requirements to make an indorser liable?

Back 6

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

Front 7

How can an indorser eliminate liability?

Back 7

Writing "without recourse"

Front 8

What is a transfer warranty?

Back 8

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

Front 9

What are the five Transfer Warranties?

Back 9

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

Front 10

When may an indorser waive transfer warranties?

Back 10

only notes, not checks