Exam 28: Liability of Parties

Warranty liability applies to persons who:

Zelda signs a note for $500 to First Bank. If, at the request of both Zelda and the Bank, Ann also signs the note as an accommodation maker:

Wanda makes a note payable to Henry in return for Henry's car. Henry negotiates the note to his cousin, Sharon, who accidentally drops it on the floor where it is swept into the garbage. What effect?

Drawers of checks may disclaim contractual liability by using the words "without recourse."

A drawee bank "accepts" a check by certification.

Thomas is the treasurer of Padgett, Inc. He has authority to sign on behalf of the company. One day, he signs a note as follows: "Thomas Seggway, as treasurer." The company's name does not appear on the note. Is the company liable on the note? Is Thomas liable on the note? Explain.

Charles is the holder of a promissory note, the maker of which is Charles' niece, Margaret. As a birthday gift to Margaret, Charles marked "Canceled" across the face of the note. Margaret remains liable on the note because she did not give Charles anything of value for the cancellation.

Jan Arthur writes a $200 check to Bruce Nole who indorses it "Bruce Nole." Bruce gives the check to Anne Tate who indorses it "Without Recourse. Anne Tate." Anne sends the check to Joe Black, MD to pay her medical bill. If the bank refuses to honor the check, Black:

Sarah has a checking account at First Bank. Orrin steals one of her blank checks, writes a check for $250 to himself, and then forges Sarah's signature. Orrin then indorses the instrument to Paul in payment of a debt. Paul presents the instrument to First Bank for payment. At First Bank's request, Paul indorses the instrument, and the bank then pays him $250. Which of the following is correct?

Presenters' warranties are exactly the same as transferors' warranties.

A bank must give notice of dishonor within one business day and a nonbank within three business days of the day on which it receives notice of dishonor.

Before an indorser can be held responsible for payment of a check, the check must be presented to the drawee bank for payment.

Bob took a check written by Jack to Jack's bank to be certified. The bank stamped "Certified" on it and gave it back to Bob. What consequence?

How can drawers and indorsers disclaim liability on an instrument? Does any different rule apply to drawers of checks?

Franz signs a $1,000 note payable to ABC Bank. If, to help Franz get the loan approved, Amy also signs the note as an accommodation maker:

To certify a check, the bank must:

Warranty liability may be imposed on both nonsigners and signers of an instrument.

A drawee bank's refusal to certify a check constitutes a dishonor of the instrument.

Return for lack of proper indorsement constitutes a dishonor of the check.

Delay in notice may be excused where the holder was too busy at work to send notices that day.