Exam 24: Liability,Defenses and Discharge

Which kind(s)of liability can be imposed only if a party has signed an instrument?

Against whom can the maker of a note successfully assert a personal defense?

What is the effect of the presence of a defense in connection with a negotiable instrument?

Breach of contract is a real defense.

Any passage of an instrument other than its issuance and presentment for payment is considered a transfer.

Which of the following is true about primary liability on a check?

A principal will be held liable for ratifying an agent's unauthorized signature.

A party can incur contract liability on a negotiable instrument only if that party's signature appears on the instrument.

Betty issues a note payable to the order of John for $2,000.John properly indorses the note,but raises the amount to $20,000,and negotiates it to Mary.On the due date,Mary attempts to collect $20,000 from Betty.Betty refuses to pay.Assuming that Mary is a holder in due course,which parties can Mary recover from in a lawsuit?

Forger drafted a promissory note and forged Fred's signature on it.Before he could do anything with it,Thief stole it and transferred it to Commercial Loan Co.,for value.Commercial usually did not buy commercial paper from people who walk in off the street,but business was slow,so the company took the note.Commercial had no notice of the forgery.On the note's due date,Commercial demanded payment from Fred.Obviously,Fred refused to pay.Commercial sues Fred on the note.Assuming the note qualifies as a negotiable instrument in all aspects not mentioned above,discuss the probable outcome of this suit.

An unauthorized signature may be ratified.

Marti issues a check payable to the order of John,who indorses the check in blank and transfers the check to Amy,who transfers the check to Bill without indorsement.Bill wishes to cash the check.Which of the following best describes the liabilities of the parties?

Personal defenses are effective against all holders,whether or not the holder is a holder in due course.

Carl is the maker of a note on which David is the payee.David indorses the note in blank and delivers it to Edward,who then transfers it to Fred without indorsement.Fred then presents it to Carl for payment when it becomes due,but Carl claims he signed the note base upon fraud in the inducement.If all of the transfers in question were for value and there are no other defenses available: a.Who has primary liability of the instrument? Who is secondarily liable on the instrument? b.Who has warranty liability? Why? Explain. c.From whom can Fred try to collect now that Carl has refused to pay?

Who is discharged if a holder strikes out a prior indorsement on a negotiable instrument?

An accommodating party that signs an instrument guaranteeing collection is ________ on the instrument.

Why is fraud in the inducement treated as a personal defense and fraud in the inception treated as a real defense? Is this distinction justifiable? On what grounds?

Betty Bongo,a real estate agent working for ABC Realty sells a home to Jason Biggs.Upon escrow closing,Betty signs the paperwork,"ABC Realty,by Betty Bogo,agent." Later it was determined that the home had Jason bought had a mold problem that should have been disclosed.If Betty Bongo did not show that her signature was made in a representative capacity and she cannot prove that the original parties did not intend her to be liable,who is liable?

How does the definition of value for purposes of holder in due course differ from the definition of consideration? Why do you think there is a difference? Should there be a difference?

When a person transfers a negotiable instrument,to whom does this transferor make transfer warranties?