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Unformatted text preview: NEGOTIABLE INSTRUMENTS UCC reporting service: all cases that have been decided Green = ? Red = Key points Yellow = important headings CHAPTER 1: NEGOTIABILITY A note is a promise two parties , ( 3-104)(j)) If made by a bank, a note is a certificate of deposit or CD . an order is a draft ( 3-103(a)(3)) Depositary bank: the bank that a payee deposits the draft X (promissory note) Y X is the maker, Y is the payee X (draft) Y X is the drawer, Y is the payee, bank is the drawee A check must be drawn on a bank ( 3-104(f)). Problem #1 A: Portia is a remitter ( 3-103(a)(11))person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser. ONB (cashiers check) seller Portia buys cashiers check from ONB ONB is drawer/drawee, seller is payee, Portia is remitter. The Negotiability Concept If a paper is technically negotiable (refers to its form) and it is technically negotiated (refers to transfer process), reaching the hands of purchaser for value without knowledge of problems with transaction which gave rise to creation of the paper, the purchaser is called a holder in due course ( 3-302(a)). For Article III to apply to either a note or a draft, the instrument must be negotiable as defined in 3-104(a), and must meet every element. If not, the instrument is non- negotiable ( 3-104(b)), and contract law applies. Under contract law, a transfer is merely an assignment of contract rights, and later holders ( assignees) take subject to all defenses arising from the underlying transaction. The transferee of negotiable paper, if a HDC, is protected by a rule requiring the original maker and all other parties to the paper to pay it at maturity, even if they have defenses arising from the transaction where they signed the paper. One cannot assert defenses against a HDC (usually called Super-plaintiff). Elements of Negotiability 3-104(a) a. Writing cannot be oral (but does not have to be on paper) b. Signed must be signed; present intent of authenticating c. Unconditional promise to pay an ordered or fixed amount (readily ascertainable) Problem #2 Howard signs checks with an X on the signature line, are checks negotiable? A: Yes, if he has the present intention to authenticate a writing . 1-201(39)- Even if the signature is for another person, it is still allowable if you have (above). (will not be ducted from that persons account but if it is then it must be credited) Problem #3 Sole proprietor signs store checks X Co., checks drawn on personal account. Can bank treat as if he signed his own name?...
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This note was uploaded on 04/27/2010 for the course LAW 840 taught by Professor Tim during the Spring '10 term at University of Louisville.
- Spring '10
- The Land