Term
| Article 3 of the UCC involes 2 types of negotiable instruments, what are they? |
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Definition
| The draft and the promissory note. |
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Term
| Does an IOU constitute rise to the level of a promissory note? |
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Definition
| No. A promissory note is a affirmative promise to pay, which is signed. |
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Term
| In the context of the note, te promisor is called the ___________ and the promisse is called the ______________ . |
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Definition
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Term
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Definition
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Term
| Why should I think of a draft as a commander? |
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Definition
| Because the draft must always contain an order. "Pay to the order to...." |
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Term
| In the context of the draft there are three parties: who are they? |
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Definition
| drawer, drawee and payee. |
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Term
What does a drawer do?
What does the drawee do?
Who is the payee? |
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Definition
The drawer gives the order
The drawee is ordered to do the paying
The payee is the beneficiary of the order |
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Term
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Definition
| The indorser is the person that signs the back of a check or a promissory note. |
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Term
| What are the elements needed to discern if somehting is a negotiable instrument opposed to a K? |
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Definition
| writing, pay to the order of OR to bearer, signed by the maker or drawer, reciting a sum certain, containing an unconditional promise or order without any other promises or orders, payable on demand or at a certain time and payable in currency. |
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Term
| Fora negotiable instrument to be valid the maker of the drawer must sign the negotiable instrument... what will do? |
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Definition
| A signature, nickname, initials.... this authenticates the negotiable instrument, it can be signed anywhere on the document. |
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Term
| If the instrument says "gverned by" or "subject to" |
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Definition
| Not a negotiable instrument.... K. |
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Term
| Will referencing other documents in the negotiable instrument make it a K? |
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Definition
| Depends, if the referenced material do not effect the unconditional nature of the instrument or if the other documents are ancillary to the negotiable instrument the note of draft is negotiable and valid under UCC Article 3. |
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Term
Is the following a negotiable instrument?
I promise to pay from the profits I make from my next harvest of wheat |
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Definition
| No this is a non-negotiable instrument because it limits payment or predicaes payment on a particular source or fund. |
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Term
| Is the following intstrument negotiable? I promise to pay $75,000 prioncipal amount plus 10% to Jon. |
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Definition
| This is negotiable because it is a ascertainable sum. You can figure it out. |
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Term
| Will an instrument still me negotiable if it sets a particular amount, plus interest, but does not indicate interest? |
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Definition
| Yes because the Court will interest will be set by stattue, therfore it is verfiable and able to be an exact figure. |
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Term
| For purposes of a negotiable instrument payment must be made on currency, which means: |
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Definition
| money or foreign currency....NOT GOODS! |
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Term
| Is the follwong subject to UCC Article 3: I promise to pay you by providing you with my Rolex wtch worth 10,000 dollars... signed... |
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Definition
| No... this is a good, must be currency. |
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Term
| Is the following a negotiable instrument? I promise to pay you $5000 and to give you my rolex. |
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Definition
| No.... two is a crowd. In a note or draft the payment of money must be the only promise. |
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Term
| When is an instrument payable on demand? |
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Definition
| It is payable on demand when it specifically says: payable on demand, paybale at sight, payable on presentation. |
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Term
| re acceleration clauses permissibel with negotiable instruments? |
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Definition
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Term
| A negotiable instrument is payable at a ________ __________ if it is payable ________ or _____________ a given date or at a ________ ____________ after a ________ _____________. |
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Definition
| definite, time, on, before, fixed, period, given, date. |
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Term
Is the following considered a definite time?
On or before Feburary 22, 2007
90 days after February 22, 2007
On February 22, 2008, but this becomes immediately due and payable if pror to that time Lance passes the bar. |
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Definition
| These are all considered a definite time, which will satisfy Article 3 of the UCC. |
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Term
| If a promissory note were to say payable when my first grandson is born, would this be considered a definite time in satisfaction of Article 3 UCC? |
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Definition
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Term
| In order for a negotiable instrument to satisfy the "payable to order requirement" the instrument must contain either the words: |
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Definition
| assigns or order in connection with the payee's name. |
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Term
| If a negotiable instrument says payable to the bearer it means what? |
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Definition
| This means tha the negotiable instrument is payable to anyone who has it. |
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Term
| If a negotiable instrument were to say, "pay to cash" or "pay to the order fo cash" what does this mean? |
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Definition
| This is another way of saying tha tit is payable to the bearer, anyone who has the negotiable instrument. |
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Term
| Is this a negotiable instrument? "Pay to Andy." |
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Definition
| No. It must say pay to the order of Andy. It may also use the words assigns or bearer to be negotiable instrument. |
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Term
| Can the drawee be liable for the draft? |
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Definition
| No because it has not signed it. |
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Term
| When an indorser signs a draft with the words "without recourse" what does this mean? |
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Definition
| It bascially shields him from signature liability, but it passes title. It is a disclaimer of liability. |
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Term
| Any transferor of a negotiable instrument for compensation is liable for breach of warranty? |
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Definition
| It means that anyone who donates or give the negotiable instrument as a gift will not be liable for breach of warranty. |
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Term
| If a D indorsed the instrument, and it is defective, who may sue? |
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Definition
| Anyone in possession of it. |
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Term
| Do warranties run with the negotiable instrument once indorsed? |
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Definition
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Term
| Lance indorses his paycheck from Beldock, Levine & Hoffman, he then remits his paycheck to Billy Crystal as payment for his services at Cole's second birthday party, Billy Crystal then remits the check to his maid for her services, it bounces... may the m |
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Definition
| Yes. The warranty runs with the indorsement of the check. |
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Term
| What if Lance receives his paycheck and does not indorse it and then hands it over to Jo the pizza man for a 2 week supply of pizza, who can sue Lance? |
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Definition
| Only the immediate transferee, Jo. If Jo passes it on to someone else, the warranty does not run with the draft, it stops with the immediate transferee. |
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Term
| What 5 warranties do indorsees (or non-indorsees) of negotiable instruments provide to their transferees? |
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Definition
Defendant (indosee or non-indorsee) promises:
1. good title to instrument
2. all signatures are genuine and authorized (forgery is a breach of warranty)
3. instrument has not been materially altered... when tampered with defective.
4. No defense or claim good against the D, meaning tha tthe instrument is enforceable.
5. No knowledge of any bankruptcy or insolvency issue with the maker or drawer. |
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Term
| If a transferee receives a negotiable instrument, the transferee becomes ... |
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Definition
| a holder who may become a holder in due course. |
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Term
| When there is "due negotiation" or "duly negotiated" that means that there is... |
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Definition
| proper transferr of a negotiable instrument. |
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Term
| If there is an improper transfer the trnasferre can never become a .... |
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Definition
| holder orholder in due course. |
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Term
When an negotiable instrument is payable to teh order of a specific payee, it is negotiated by ....
Any further negotiation requires that the payee ..... |
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Definition
the delivery of the instrument to the payee.
The payee must indorse the negotiable instrument AND deliver it to the transferee. |
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Term
| Simon finds a check made payable to the order of Paula Abdul, he brings it to Randy's music shop and signs it... Is Randy a holder? |
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Definition
| No. Paula was specifically the payee and she never indorsed it: it is defective transfer. |
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Term
| Paula Abdul get her paycheck from American Idol, the check is for 380,000. The check says payable to the bearer, what if she drops it an someone picks it up and indorses it.... and use it to purchase a house, is the homeowner a holder? |
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Definition
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Term
| What types of indoresements are there? |
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Definition
| special or blank and restrictive and non-restrictive. |
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Term
| The special indorsement is one that... |
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Definition
| specifies a particular indoresee, if the indorseee does not sign it cannot be negotated further. |
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Term
| I have a check and on the back I write: "Pay to the order of Jen." and sign it Lance Simon... what type of ndorsement is this? |
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Definition
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Term
| If someone were to rob your bag and you had a special indrsed check to you and the person who robbed you signs the indorsee;s name under it, does the store become a holder? |
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Definition
| No. Defective. If the indorsee signed it different outcome. |
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Term
| What is an example of a blank indorsement? |
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Definition
| I get my paycheck and sign it then deliver it to Cecilia. |
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Term
| Wha tis the result? If a payee delivers a blank indoresed check to a transferee and the transferee loses it and a third party finds it, signs it and gives it to another. |
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Definition
| The final person would be a holder in this scenario becaus in this scenario all that matters is that the payee endorsed. |
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Term
| Wha tis an example of a restrictive indorsement? |
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Definition
| "For deosit only" -Lance Simon, Wendy finds it and cashes it at her bank. The bank here is not a holder because of the restrictive indorsement: deposit only in Lance's account. |
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Term
| If a restrictive indorsement is not followed, meaning a condition on the draft is not followed, what is the cause of action for the indorsor? |
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Definition
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Term
| Who is the holder in due course? |
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Definition
| He is the holder who takes the negotiable instrument. |
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Term
| A holder in due course takes the instrument: VG, NODD |
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Definition
| A holder in due course takes the instrument for value, in good faith and without notice of overdue, has been dishonored, or subjected to claims or defenses. |
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Term
| A holer in due course takes for value meaning? |
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Definition
| He gives value for the instrument. Value in theis contet is not consideration. |
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Term
| How do value and consideration differ? |
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Definition
| A mere promise is not giving value. Old value is good value. |
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Term
| Jen indorses and delivers her paycheck to Brain to pay him for painint he did for her last week. Has Brian given value for the negotiable instrument, Jen's check? |
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Definition
| Yes because old value is considered good value. Therefore if the remaining elements are met Brian can be a holder in due course. |
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Term
| Zach indorses his paycheckl and delivers his paycheck to Mariel. In return, Mariel promises to cook his dinner for the next 2 weeks. Can Mariel be a holder in due course? |
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Definition
| No. A promise is not value. For Mariel to be a holder in due course she must give Zach real value for the indorsed negotiable instrument. A promise to do something in the future does not qualify as value. |
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Term
| To be a holder in due course you must also take the indorsed negotiable instrument in good faith. What constitutes good faith? |
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Definition
| Good faith means honiest un fact: pure heart and empty head rule. |
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Term
| To be a holder in due course the holder could not of had notice of the instruments's defect, meaning tha it was overdue or subject to a defense or claim. What test is applied here? |
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Definition
| It is an objective test did the person know or have reason to know tha tthe instrument was defective? |
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Term
| If a holder knows or has reasont o know that the instrument is overdue, meaning should have been paid, then the holder.... |
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Definition
| cannot be a holder in due course. |
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Term
| When an instrument says VOID or PAID can a holder ever become a HDC? |
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Definition
| No. He has notice of the defect. |
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Term
| What is the status of the following: Lance sells a rug to Tom, misrepresenting it saying it is an antique, purchased for 10 bucks. Toms signs and delivers negotiable note 20k. Lance then sells the instrument to Graig. |
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Definition
| Tom is the drawer and Lance is the payee. Tom may seek to revoke the deal once he finds out rug is a fake, therefore there is a claim or some type of defect with the negotiable instrument. As to Graig, Lance is the indorser and the indorsee Graig may be a holder in good faith.... Lance has 5 warranties to Graig.... Garaig may be a holder in good faith if he provides Lance with value for the instrument (20k), takes in good faith, and has no notice of its defect. |
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Term
| If a holder becomes a holder in dies course does he take over the true owner? |
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Definition
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Term
| HDCs take free from personal defenses.. which defenses? |
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Definition
| Basically all the regular K defenses. |
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Term
| HDCs takes subject to any rela defenses, which are.... MADFIFI4 |
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Definition
| material alteration, duress, fraud in the factum, incpacity, illegality, infancy and insolvency. |
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Term
| Drawer delivers to X a negotiable instrument signed.... the payee adds three zeros onto what was supposed to be a 300 check... wha tis the status? |
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Definition
| The payee made a material alteration and therefore the transferee cannot become a HDC b/c of the material alteration. the transferee may argue that if the drawer was negligent by not filling out the instrument correctly that the indorser should be liable (drawer). |
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Term
| Wha tis eal fraud, or fraud in the factum? |
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Definition
| It is fraud about the instrument itself. A lie.... therefore a subsequent HDC cannt enforce the negotiable instrument. |
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Term
| Personal v. Real Fraud... |
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Definition
| Real fraud would be when someone does not know they are signing a negotiable instrument versus defrauded which led to your delivery of a negotiable instrument. |
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