Chapter 25 Business - Ch 25 Transferability Holder in Due Course Negotiation is the transfer of an instrument in such form that the transferee(the

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

View Full Document Right Arrow Icon
Negotiation: is the transfer of an instrument in such form that the transferee (the person whom the instrument is transferred) becomes a holder. Holder: A holder receives, at the very least, the rights of the previous possessor. Negotiating Order Instruments: - An order instrument contains the name of a payee capable of indorsing, as in “Pay to the order of Elliot Goodseal.” - If an instrument is an order, it is negotiated by delivery with any necessary indoresemnts. - Negotiating order instruments requires both delivery and indorsement. Negotiating Bearer Instruments: - If an instrument is payable to a bearer, it is negotiated by delivery-, that is, by transfer into another person’s possession. - Indorsement is not necessary. - The use of bearer instruments thus involves a greater risk of loss or theft than the use of order instruments. Indoresements: - An indoresement is a signature with or without additional words or statements. - It is more often written on the back of the instrument itself. If there is no room for the instrument, the indoresement itself can be written on a separate piece of paper called an allonge , and affixed to the instrument. - A paper affixed to a negotiable instrument is part of the instrument. Indorser: A person who transfers a note or draft by signing (indorsing) it and delivering it to another person. Indorsee: The person to whom the check is indorsed and delivered. Blank Indorsements: - A blank indorsement specifies no particular indorsee and can consist of a mere signature. EX: “to the order of Mark Deitsch” can be indorsed in blank simply by writing Deitsch’s signature on the back of the check. - An instrument payable to order and indorsed in blank becomes a bearer instrument and can be negotiated by delivery alone - A blank indorsement converts an order instrument to a bearer instrument, which anybody can cash. Special Indorsements: - A special indorsement identifies the person to whom the indorser intends to make the instrument payable; that is, it names the indorsee. - To avoid the risk of loss from theft, a holder may convert a blank indorsement to a special indorsement. This changes the bearer instrument back to an order instrument. - A holder may “convert a blank indorsement that consists only of a signature of the indorser, words identifying the person to whom the instrument is made payable”.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Qualified Indorsements: - Generally, an indorser, merely by indorsing, impliedly promises to pay the holder, or any subsequent indorser the amount of the instrument in the event that the drawer or maker defaults on the payment. - Then, indorsements are unqualified indorsements . In other words, the indorser is guaranteeing payment of the instrument in addition to transferring title to it. Qualified Indorsement:
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 11/15/2011 for the course BUSINESS L 2331 taught by Professor Staff during the Fall '09 term at Sam Houston State University.

Page1 / 9

Chapter 25 Business - Ch 25 Transferability Holder in Due Course Negotiation is the transfer of an instrument in such form that the transferee(the

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