CPA law - Chapter 24: Holder in Due Course and Liability...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 24: Holder in Due Course and Liability Chapter Objectives Define a holder and a holder in due course. Identify and apply the requirements for becoming a holder in due course. Describe the signature liability of makers, drawers, drawees, and accommodation parties. Distinguish between primary and secondary liability on negotiable instruments. List the transfer warranties and describe the liability of parties for breaching them. List the presentment warranties and describe the liability of parties for breaching them. Identify real defenses that can be asserted against a holder in due course. Identify personal defenses that cannot be asserted against a holder in due course. Describe how liability on a negotiable instrument is discharged. Describe the Federal Trade Commission rule that prohibits the holder in due course rule in consumer transactions. Holder and holder in due course A holder is a person who is in possession of a negotiable instrument that is drawn, issued, or indorsed to him or his order, or to bearer, or in blank. A holder in due course is a holder who takes a negotiable instrument for value, in good faith, and without notice that it is defective or overdue. Requirements for becoming a holder in due course To be a holder in due course of a negotiable instrument, the negotiable instrument must be taken: For value (holder must have given value In good faith (honesty in fact in the conduct or transaction concerned) Without notice of defect Without any apparent evidence of forgery, alterations, or irregularity Signature liability of makers, drawers, drawees, and accommodation parties Signature liability means that a person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on the instrument. A signature is any name, word, or mark used in lieu of a written signature. A signature may be handwritten, typed, printed, stamped, or made in almost any other manner and executed or adopted by a party to authenticate a writing. Primary and secondary liability on negotiable instruments Primary liability is absolute liability to pay a negotiable instrument, subject to certain real defenses. Secondary liability is liability on a negotiable instrument that is imposed on a party only when the party primarily liable on the instrument defaults and fails to pay the instrument when due. Requirements for secondary liability include: The instrument is properly presented for payment. The instrument is dishonored. Timely notice of the dishonor is given to the person to be held secondarily liable on the instrument.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Transfer warranties and liability of parties breaching them Any of the following five warranties are transfer warranties: The transferor had good title to the instrument or is authorized to obtain payment or acceptance on behalf of one who does have good title. All signatures are genuine or authorized.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/24/2011 for the course BUSI 1301 taught by Professor Dr.frith during the Spring '09 term at Central Texas College.

Page1 / 6

CPA law - Chapter 24: Holder in Due Course and Liability...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online