commercial paper

  1. negotiable instrument elements
    writing, signed by maker, unconditional, promise or order to pay, fixed amount of money, no other unauthorized promise, on demand or at a definie time (to order or bearer)
  2. HDC elements
    possession, good title, good faith, w/o knowledge of issues
  3. authorized promises
    • collateral
    • confess a judgment
    • waive legal rights
  4. tx precluding HDC status
    • purchasing instrument at judicial sale
    • acquiring by taking over estate
    • acquired as part of bulk transaction
  5. real defenses (FAIDS)
    • Forgery
    • Fraud in factum
    • Alteration
    • Incapacity
    • Illegaligt
    • Duress
    • Discharge in insolvency (BK)
    • Suretyship
    • Stat Lit
  6. what is the shelter rule
    • transferee enjoys defenses of HDC
    • exception: doesnt apply if fraud/illegality affecting instrument
  7. secondary liability for indorser
    • presentment (30 day limit)
    • dishonor
    • notice of dishonor
  8. effect of a qualified endorsement
    "without recourse" you get out of liability
  9. what are the 5 transfer warranties?
    • good title
    • genuine signatures
    • no material alteration
    • no defenses
    • no knowledge of insolvency proceedings
  10. drawee
  11. drawer
    check maker
  12. payee
    check recipient
  13. drawee
    acceptance by bank discharges drawer
  14. what is the properly payable rule
    bank must pay checks that are properly payable, must not pay those not properly payable
  15. validity of stop payment orders
    • valid if customer identified item & gave bank notice
    • oral - 14 days
    • written 6-mos
  16. what is a stale check
    6 mos or older, bank can cash if in good faith
  17. post dated checks
    only valid if gives bank notice and IDs the item
  18. effect of drawer's death
    payable until bank knows of death. 10 day window
  19. effect of drawer's negligence
    precludes asserting properly payable rule (ratified forgery or alteration)
  20. effect of fictitious endorsements
    • impostors: valid eg im tiger woods
    • valid if EE responsible for check writing who forges signatures
  21. drawer's negligence and wrongful honor claims
    • check signed blank - on the hook
    • late notice to bank for forgery etc - on the hook
  22. 3 common law doctrines that limit bank's liability
    • ratification of forgery
    • agency law
    • estoppel
Card Set
commercial paper
commercial paper