BL-Chapt26 - Print Chapter Page 1 of 24 Liability,...

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Liability, Defenses, and Discharge Chapter Introduction 26-1 Signature Liability 26-1a Primary Liability 26-1b Secondary Liability 26-1c Accommodation Parties 26-1d Authorized Agents' Signatures 26-1e Unauthorized Signatures 26-1f Special Rules for Unauthorized Indorsements 26-2 Warranty Liability 26-2a Transfer Warranties 26-2b Presentment Warranties 26-3 Defenses 26-3a Universal Defenses 26-3b Personal Defenses 26-3c Federal Limitations on HDC Rights 26-4 Discharge 26-4a Discharge by Payment or Tender of Payment 26-4b Discharge by Cancellation or Surrender 26-4c Discharge by Reacquisition 26-4d Discharge by Impairment of Recourse 26-4e Discharge by Impairment of Collateral Chapter Recap Page 1 of 24 Print Chapter 2010-8-30 ..
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Chapter Introduction Two kinds of liability are associated with negotiable instruments: signature liability and warranty liability. Signature liability relates to signatures on instruments. Those who sign negotiable instruments are potentially liable for payment of the amount stated on the instrument. Warranty liability, in contrast, extends to both signers and nonsigners. A breach of warranty can occur when the instrument is transferred or presented for payment. Note that the focus is on liability on the instrument itself or on warranties connected with the transfer or presentment of the instrument as opposed to liability on any underlying contract. Suppose, for example, that Donna agrees to buy one thousand compact discs from Luis and issues a check to Luis in payment. The liability discussed in this chapter does not relate directly to the contract (for instance, whether the compact discs are of proper quality or fit for the purpose for which they are intended). The liability discussed here is the liability arising in connection with the check (such as what recourse Luis will have if Donna's bank refuses to pay the check due to insufficient funds in Donna's account or Donna's order to her bank to stop payment on the check). The first part of this chapter covers the liability of the parties who sign instruments–for example, drawers of drafts and checks, makers of notes and certificates of deposit, and indorsers. It also covers the liability of accommodation parties and the warranty liability of those who transfer instruments and present instruments for payment. The chapter then examines the defenses that can be raised to avoid liability on an instrument. The final section in the chapter looks at some of the ways in which parties can be discharged from liability on negotiable instruments. Page 2 of 24 Print Chapter 2010-8-30 ..
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26-1 26-1a 26-1b Signature Liability Primary Liability Makers Acceptors Secondary Liability The key to liability on a negotiable instrument is a signature. As discussed in Chapter 24, the Uniform Commercial Code (UCC) broadly defines a signature as any name, word, mark, or symbol executed or adopted by a person with the present intention to authenticate a writing
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BL-Chapt26 - Print Chapter Page 1 of 24 Liability,...

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