commercial paper cards.txt

(1) writing; (2) signed by maker/drawer; (3) unconditional promise or order to pay; (4) fixed amount; (5) in money; (6) no other undertaking or instruction; (7) payable on demand at definite time; (8) contains words of negotiability

(1) negotiable instrument; (2) holder; (3) authenticity not apparently questioned; (4) holder must pay value; (5) good faith; (6) without notice at time of instrument acquisition; (7) shelter rule application?; (8) burden of proof on HDC

infancy; duress which voids; lack of capacity (if voids); illegality (if voids); fraud in the execution; discharge in bankruptcy; omission of required consumer protection language; SOL; payment to former holder; alteration; unauthorized signatures/forgeries

1. identify the type of paper. 2. identify the parties. 3. determine whether the document is negotiABLE. 4. determine if the instrument was properly negotIATED. 5. Determine if transferee is a HDC. 6. Determine P's cause of action (k, tort, warranty, not properly payable). 8. if d liable, can D pass on liability to anyone else?

2 party instrument. it is a promise to pay.

the promisor (obligor) in a note - the person who has to pay

the promisee in a note - the person who is entitled to payment

this is a note issued by a financial institution. it acknowledges receipt of money & the financial institution is promising the payee/depositor to repay the money

this is an order to pay money - it's a 3 party instrument

this is the person ordering payment in a draft. this is you when you write a check.

this is the person who has to make the payment. often the PAYOR bank.

this is the person who will receive the money. the person who receives the check, for example.

a financial institution must be the drawee & it has to be payable on demand. that is, whenever the payee wants the money, thus it cannot be contingent upon the satisfaction of any prior condition.

ordinary check w/ a bank has accepted - that is, the bank has agreed to pay it already

this is where the drawer & drawee are the same bank. the person buying the check is the remitter.

check drawn by one bank on another bank. the person buying the check is the remitter.

this is a demand instrument that requires a COUNTERSIGNATURE by a person whose specimen signature is already on the instrument. that is, there is already a signature to compare it to

draft not signed by drawer but created w/ authority given by drawer so that 3P can get paid from the drawer's acct at bank. you'll use this when you purchase things over the internet or pay bills over the phone by giving acct #

you can make an instrument non-negotiable by stating on the document. can't opt in of course. can't opt out for CHECKS.

any mark executed/adopted w/ present intent to authenticate a writing

express condition precedent to payment; making the promise/order "subject to" or "governed by" another record; incorporation by reference (i.e., where rights/obligations are stated in another record).

mere statement of consideration; reference to another record (stating "as per" or "in accordance w/"); incorporation by reference of items that would not hurt holder (rights regarding collateral, prepayment, acceleration); limitation of payment to a particular fund or source; countersignature; consumer protection language (this can ruin HDC status though)

need to be able to look at the instrument & determine the PRINCIPAL amount due. there is a presumption of no interest. will still be negotiable despite reference to outside source for determination. if the actual interest rate isn't stated, then the rate will be the judgment rate

must be some kind of "authorized medium of exchange" (i.e., some kind of real money)

words will prevail over figures

an instrument is not a full k--it's just a promise to pay.

promises concerning collateral; confession of judgment clauses; waiver of law intended to benefit the obligor

can expressly state payable date or, if silent, it is a demand instrument. can be a fixed period after sight/acceptance. time must be readily ascertainable when promise/order issued. the fact that the date can be changed doesn't affect negotiability status.

"payable to bearer"; "payable to the order of bearer"; "to cash"/"to order of cash"; indicating that possessor is entitled to payment; if no payee is stated. for example, a check where payee name is blank is bearer paper.

pay to the order of X. usually pre-printed on checks.

bearer language will control - thus bearer paper

(1) possession AND (2) good title

for bearer paper, you just need possession. for order paper, you need possession AND necessary indorsements

blank indorsement creates bearer paper--it's just the payee signature, which lets anyone cash it. a special indorsement designates a new payee basically--creates order paper.

limits what can be done w/ the instrument. for example, limiting it for deposit or collection only

the intent of the issuer of the neg instrument will determine who the initial payee is

transferee's signature

can't indorse w/o capacity. thus, minor/incompetent/undue influence can all be problems.

i.e., there is no evid of forgery/alternation, irregularity or its incomplete such that it will call into question whether the instrument is legit

can't be grossly disproportionate to the face value of the note

both subjective & objective component. honesty in fact (subj) & rznable commercial standard of fair dealing (obj)

refers to ACTUAL (subj) knowledge. there must be notice AND rznable time on which to act. look to the circumstances (subj) to determine whether a person had rzn to know (obj). mere filing is not notice. if instrument is dishonored, overdue prinicipal (not interest) can be notice. if due date of neg inst. or 90 days after issuance of check have elapsed. also, uncured default re: another instrument as part of same series. unauthorized signature, alteration, other claims or defenses to the instrument.

even if a holder is not a HDC, that person can have the same protections afforded a HDC b/c of this rule. this is b/c the transfer of an instrument will vest in the transferee the rights. thus, you have the rights, but are not a HDC. shelter rule will not apply if fraud/illegality

on the party claiming HDC status

excusable ignorance (or excusable ignorance test)

treat the instrument as if it actually contains the language (thus providing the defense despite the lack of the provision)

NOTES: 6 yrs from DUE DATE (NOT ISSUANCE). For unaccepted DRAFTS, it is 3 yrs after dishonor or 10 yrs after ISSUE

will discharge liability unless the obligated party had received proper notice re: the transfer. to be proper, notice must be signed by the transferor/transferee, rznably identify the note, provide addresses for payment.

HDC will win, despite the rightful claim to the neg instrument

you can do this on anything but a check as the drawer (you can do it as payee). for example, writing "without recourse." this won't work on a check, but it would prevent the drawer from being liable w/r/t other neg instruments

(1) presentment; AND (2) dishonor. presentment to drawee must occur within 30 days (however, this will only save you if the bank had become insolvent).

to refuse to pay the instrument despite proper presentment

it is based on the order of signatures. you sue prior indorsers, you are liable to later indorsers.

(1) presentment; (2) dishonor; AND (3) notice of dishonor

the drawee didn't sign, so they have no liability. there is an exception if there is acceptance or certification, however.

you can sue the bank, you can't sue the drawer - their liability is discharged upon certification by the payor bank

final payment occurs when the drawee bank (1) pays in chas or (2) does not revoke a provision settlement by midnight of the next banking day after the banking on which the neg instrument was received

the drawee is liable to the payee for conversion. to sue for conversion, you must have RECEIVED DELIVERY of the instrument. no conversion suit possible if they caused it to get lost & never received, for example

drawee bank MAY continue to pay checks until it knows of death of drawer & has a rznable opportunity to act on this knowledge. drawee bank may make payments for no more than 10 days after the death of the drawer if the bank knows of the death. if someone CLAIMING AN INTEREST in the acct requests the drawee bank to cease making payments immediately, the bank must comply, regardless of the 10 day rule.

no. can attempt to collect from either. the co-signer can limit its liability to collection only, however.

an accommodation party is entitled to reimbursement for paying for the principal

express language or by an anomalous indorsement (i.e., an indorsement outside the chain of title)

a transferor who receives CONSIDERATION. thus you can't have a transfer warranty if given as a gift.

immediate transferees as well as subsequent transferees if the transferor indorsed. however, for banks, liability runs w/o endorsement.

no. they get the instrument presrented to them, not transfered.

(1) that the warrantor is entitled to enforce the instrument--says that the holder has good title. (2/3) guarrantees that there are no alterations, that all sigantures & authentic & authorized & (4) that there aren't any defenses against the transferor--perfect plaintiff warranty. no knowledge is required for these 4 warranties. also warrants there is no KNOWLEDGE of insolvency proceedings. also, if it is a remotely-created instrument, warrants that it was made w/ authorization

NO. they are mutually exclusive. a P can only have one of these warranty causes of action despite the fact that both warranties might have been made.

presenter & ALL previous transferors.

made to parties who pay in good faith, that is the mater for notes or the drawer for checks or the acceptor for certified checks. if the plaintiff is the holder (i.e., the holder has not paid on the instrument yet b/c a check bounces or a promissory note is not paid), then the holder will sue the indorser on the indorser's k. However, if the plaintiff is the payor & the payor has paid & later discovered that he should not have b/c of forgery or alteration for example, then the payor will sue for breach of warranty.

surrending instrument to obligor, destroying it, canceling it (writing void)

bank can pay postdated check unless customer gives notice of postdating & describes the check w/ rznable certainty

only drawer can stop payment on a check--no other party can do this. it must be in WRITING (although a bank can if it so desires do so for an oral. the writing must be signed, dated, describe. valid for 6 mo.

argue that the order did not meet the requirements; argue no loss as the drawee would had to have paid the check even if payment had been stopped (e.g., presenter had HDC status)

drawer may bring action against drawee for bouncing a check wrongfully. payee can't sue. drawer can recover all damages. bank defenses: check 6+ mo old, would overdraw acct.

can indicate on the check that it is for satisfaction of an unliquidated or bona fide disputed claim. 90 days to return, can tell ahead of time to make full payments.

maker is not liable--not their signature. will count as the signature of the forger & they will be liable.

drawer is not liable. drawee bank must recredit the drawer's acct unless bank has a defense. bank cannot pass on this loss unless there was a breach of presentment warranty. normally there will not be a breach of presentment warranty as the parties had a right to enforce the obligation on the forger. drawee takes the risk unless presented KNEW that it was an unauthorized

drawer's negligence - argue that the drawer substantially contributed to the forgery, thus cannot bring the claim.

duty to inspect statement. must look at statement & canceled checks in a timely manner. if drawer does not & bank can prove a loss beyond original mistaken payment then customer is precluded from bringing not properly payable action. forged drawer's signature must be reported to bank within 1 yr regardless of negligence, however

if the same person is forging a series of checks, must report the forgery within 30 days of when the statement was available - if they don't do so then the bank won't have to recredit the acct for subsequent forgeries by that same forger

seeing as indorsement is not necessary for bearer paper, it is irrelevant here

breaks the chain of title & thus the check is not properly payable. drawer may demand that the drawee bank recredit the drawer's acct as the check was not properly payable

the issuer is estopped from denying the validity of the forged document. estopped b/c the issuer acted carelessly & thus is deemed to have contributed to the forgery of the instrument

if the EE had responsibility w/r/t an instrument & that EE makes a fraudulent indorsement, ER can't prevent enforcement

change in obligation; unauthorized completion

only for original amount--not for enhanced amount

yes

fraudulently made by holder will result in a total discharge of obligor. if not fraudulently made, then the obligor will be liable for the original terms