BLAW WEEK 12 Test 3 StudyGuide
BLAW WEEK 12 Test 3 StudyGuide BLAW 3311 - 001
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This 7 page Study Guide was uploaded by Alise Rekieta on Monday November 16, 2015. The Study Guide belongs to BLAW 3311 - 001 at University of Texas at Arlington taught by Lee C Schwemer in Summer 2015. Since its upload, it has received 183 views. For similar materials see LAW I in Business Law at University of Texas at Arlington.
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Date Created: 11/16/15
BLAW TEST 3 on Monday November 16 2015 Chapter 2528 Paqes 476555 50 questions MCTF Scantron ampampamp 2 pencil Please note this is not an extensive review Review the chapters lecture notes and the chartscases in the book I go into the basics of everything he explicitly reiterated to review Chapter 25 pg 476492 See chart Basic types of Negotiable instruments Orders to pav v Promises to pav ampthe parties involved drafter draftee who writes the check the person who makes out the instrument the payer the institutionbank that it s drawn on they receive the money and pass it on can be a HDC payer payer bank is the bank in which the check is drawn the drawee bank acceptor the person the drawee who accepts a draft and agrees to be primarily responsible for its payment acceptee is the payee in a timesight draft scenario it s not a draft says I promise to pay involves 2 parties one who promises to pay a certain sum to the holder of the promissory note or the CD the person it s made payable to person who receives the money often the HDC Trade acceptance Is a type of draft that is frequently used in the sale of goods The seller of those goods is the drawer and the payee The buyer to whom credit is extended is the drawee This type of draft orders the buyer to by a set amount from the seller at a time in the future there are no conditions to payment 1 it must be in writing Permanent lncase you were asked it coullldd be written in pencil 2 Must be portable 3 Must be signed the UCC is liberal on signature requirements this could be a thumbprint initials an x nickname 4 Must have a command to pay ex Pay to the order of or promise to pay amp Must have certaint An condition to a ment would make it uncertain r eerrr say governed by or rerer re a document outside of the instrument as a conditional item Subiect to or governed bv is bad If it says this note is in exchange for a car etc per this contract is good because its referring to the transaction not a separate condition 5 Must have a fixed amount payable interest unless s ecified is assumed to be the le al amount of interest at 6 6 UCC 3014 A defines money as a medium of exchange authorized or adopted by a domestic or foreign govt as a part of the currency or equivalent to the domestic currency Gold is not a medium of exchange if it was made payable in gold it is nonnegotiable 7 Must be payable on demand or a fixed date if you can t tell the date from the of the instrument then it does not have a fixed day to pay Must be dated to be payable 30 days from sight Payable on sight or Payable on presentment anything definite would qualify Presentment occurs when a demand to pay or accept an instrument is made by or on behalf of a person entitled to enforce the instrument Basically the person is bringing it to the correct party In regard to demand instrument if you take a check more than 90 days after the date it was issued it would be considered too late to accept it Notes that advertise over time should involve interest If not payable at a reasonable time the person liable cannot extend And only the drawer can extend not the holder The liable person cannot extend it What are they When a bank draws a check on itself and is a negotiable instrument on issue The bank assumes responsibility for paying the check Making the check more readili available as a substitute for cash it could be payable on demand or on a certain date or however many days after a certain date on or before a certain date however many days after sight etc any person in possession of an instrument that is payable either to the bearer or the identified party Pg 486 Acceleration clause allows a payee or other holder of a time instrument to demand payment of the entire amount due with interest if a certain event occurs such as a default of an installment when due The UCC is verv liberal Anything you place on a signature line you can be bound by Official federal currency Can t pay in goods or services Chapter 26qu 493511 Hammett v Deutsche Bank National Co Basically explains how a bearer instrument can be easily transferred or stolen because nobody has to sign for it it doesn t have any designated payee The person who received the stolen instrument can be a HDC because they didn t know it was stolen m name of the payee capable of endorsing They must be signed and delivered does not specify a particular endorsee and can consist of a mere signature Example a check payable to the order of Mark Suarez can be endorsed in blank sim l by writing Suarez on the back contains the signature of the endorser and identifies the person to whom the endorser intends to make the instrument payable to and names the endorsee Example Pay to the order of Mark Suarez or Pay to Mark Suarez followed by the si nature of the endorser without recourse an endorser who does not wish to be qualified on an instrument can use a qualified endorsement to disclaim this liability Example Pay to Mark Suarez without recourse signed the signature of the endorser restrictive It says I m signing but I m not going to be liable contractually not secondarily liable If an indorser does not wish to be liable on an instrumentthen can disclaim the liability by writing without recourse on the instrument Ex 268 If a check is made payable to the order of B by A B wants to negotiate the check to A does not want to assume liability for the check s payment B could create a qualified indorsement by endorsing the check as Pay to A without recourse signed B Requires the endorsee to comply with certain instructions regarding the funds involved but this does nothin to rohibit further ne otiabilit Pay Jim Smith only Writs to someone who is to hold or use the funds for the benefit of the endorser or a 3rd party Pay Jim Smith for the benefit of his baby daughter endorsed to someone on behalf of someone else or paid out to either either can sign and paid out to both both have to sign using a slash comma colon etc the payees are assumed to be alternative and either party can sign and be paid Takes an instrument in good faith free from most defenses and claims that could be asserted against the transferrerand because they are a holder that meet certain acquisitions see below they are protected because they meet these requirements they are protected on a higher level from claims asserted by other arties Must first be the holder of a negotiable instrument and must have taken the instrument 1 For value Value must be given NOW or in the PAST 2 In good faith 3 Without notice that it was defective such as if an instrument is overdue dishonored irregular or incomplete Knowledqe of anv claims or defenses If a person signs over a check under duress or from undue influence if an instrument is overdue or you know its been refused void altered signed by someone unauthorized torn up destroyed and reassembled or dishonored See case example on 00 504 If you take an instrument from a thief and didn t know it was stolen then you are still a HDC Good faith example A carpet cleaning services gives service to the customer who pays with a note and the carpet cleaning company presents the note to the finance company If the finance company continues to take the note afterwards knowing that the carpet cleaning company has a history of being sued by their customers then the finance company cannot take the note in good faith If you sign an instrument and it is incomplete a different amount or different payee gets filled in later You have to pay it as it s been made out You are liable for your incomplete instrumentto a holder in due course if you left it incomplete but signed it anyways if you sign it and it39s not completed you are out of luck it39s in the hands of an HDC The rule set out in the UCC a person who does not qualify as an HDC but who derives his or her title through an HDC can acquire the rights and privileges of an HDC If in original transaction there was some kind of fraud or mistake some defense and it transferred to a HDC and the HDC transfers it to someone who is not a HDC either by gift or they have knowledge Can the person who is not a HDC enforce it Bv general rule Yes If you take an instrument from a HDC but you don t qualify personally as an HDC you can still make them pay because you taken on the rights of the previous HDC See example 2624 A holder who cannot qualify as an HDC can take the rights of a HDC if heshe derives title through an HDC He will not ask about the exception The holder is also not allowed to improve hisher status by repurchasing the instrument from a later HDC Cha ter 27 a 512526 Who is the primary party liable on a draft drafterdrawerdrawee on a note the maker Review the 3 page story at the beginning of this chapter You are secondaril liable if ou write a bad check And they can sue you If you re going to hold a drawer secondarily liable days from date of drafting If an agent signs the agent39s name or he doesn t state that he s an agent the liability falls on the agent If the agent is liable to sign for the principle and does state that he is an agent then the liability falls on the principal HDC The agent has to indicate he is an agent if he doesn39t want to be liable one who through deception induces a maker or drawer to issue an instrument in the name of an impersonated payee Ben Carson example If a man who you think is Ben Carson came to visit and you gave him something to sign but it turns out it wasn t Ben Carson and he signs for 1 million dollars as Ben Carson this falls under the imposter rule and you are then held liable universal defensesalso called real defenses valid against all holders including HDCs and holders through HDCs Forgery of signature on the insturatume Material alteration Discharge in bankruptcy Minority ille alit mental inca acit extreme duress H You aren39t liable if you were deceived into thinking it was something different than what you were signing Wnen a person causes an instrument to be issued to a payee who has no interest in the instrument then the payee is referred to as a fictitious payee It can be a person or a firm who does not exist or a party who will not acquire any interest The company who puts someone in charge of making checks make out checks to real or fictitious people they sign their names and run off with the monev the company is liable because thev hired the person that did that if the employee is signing hot checks the company that retains them will be held liable Not required to sign but you are liable to at least the M person it s transferred to that you received value from 2 types of warranty liability transfer warranty liability a person who transfers an instrument for consideration makes the following 5 transfer warranties to all subsequent transferees and holders who take the instrument in good faith 1Title 2 All signatures are good 3 No alterations 4 No claims or defenses against the instrument 5 No knowledge of maker acceptor or drawer insolvency presentment warranty liability any person who presents an instrument for payment or acceptance makes these warranties to any other person who pays or accepts it in good faith 1Title 2 No alterations 3 No knowledge that the signature of the drawer is unauthorized Severely limits the rights to HDC that purchase instruments arising out of consumer credit transactions It does not prohibit 3rd parties from purchasing notes or credit contracts that do not contain the acquired notice If they don t put this notice in their contract then the third party is not subject to the buyers defense and it leaves liability all on the seller Anvone else who acquires that paper is subiect to the defense that existed in the original transaction there can be no HDC related to a consumer credit transaction for goods and servnces liability on an instrument can come from payment cancellation or material alteration of the instrument Also discharge by reacquiring of an instrument discharge by impairment of recourse if a holder impairs another party s rights of recourse or by impairment of collateral if a holder surrender s collateral without consent Best way Discharge by payment the party primarily liable pays it in full then everyone else is discharged but if they refuse it then we get into secondary liability Chaloter 28 DC 531 553 a special type of draft drawn on a bank ordering the bank to pay a fixed amount of money on demand a holder can recover all banks expenses incurred interest and consequential damages same for certified and travelers checks A certified check is a check that has been stamped to show that it has been accepted or precertified from a bank on which it is drawn When it is precertified the money is immediately removed from the drawer s account and then placed in the bank s own certified checking account to be withdrawn by the drawee The drawee bank is agreeing in advance to make the transfer Yes A bank may may charge a post dated check unless pg 536 a separate written notification in a timely manner not to pay the check a check that is presented more than 6 months from date of drafting Not obligated to pay an uncertified check presented after the 6 months Banks don t have to pay them but they can as long as they arn t suspicious Incompetence or death of a customer neither the death or incompetence revokes the bank39s authority to pay an item until the bank has had ample time to react to the notice 10 davs from date of death to keep paying checks Not from the date of noticeThe Bank doesn t have liability if they were not given notice on a forged or altered drawer39s signature on a you have 30 davs from the date of receiving it to check your bank statement and alert of the forgery IF a bank is negligent and pays your check anyways they will share liability The bank more often than not has to eat it if a customer s negligence substantially contributed to the damages suffered by the bank If your signature dets forqed then your bank can recover usualli from the only party that knew it was forged usually the forger but the forger of the check from the customer or the holder who present the check for payment What happens if you lose your debit card If a debit card is lost or stolen and used without his or her permission the customer must notify the bank You have 2 days to notify and your liability stays at a maximum of 50 then up to 60 days of notification with a maximum of 500 liability but anything after the 60 days the sky39s the limit If you write a check and one of the endorsements on the back is forced are you liable No you are not usually the liability is pushed back to the first person that accepted the checkusuallv a bank But your account is not liable The customer is not liable but the incident must be reported within 3 years Endorsement forgery is harder to catch so they provide a larger window for reporting the forgery Pg 548
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