Exam 25: Transfer and Holder in Due Course

A person can be a holder if:

An indorsement in trust creates a trust for the benefit of the indorser or others.

A forged or otherwise unauthorized signature necessary to negotiation breaks the chain of title to the instrument.

Lily drew a check on First Bank payable to Shelley.Lily signed the check in the normal place at the bottom, right side of the check.Glenn signed the check at the bottom left of the front of the check.In what capacity will the Code interpret Glenn to have signed? Will Glenn be able to introduce parol evidence to establish his intent?

An indorsement "Pay to Jones Construction Company upon completion of the job at No.10 Park Place" is ineffective under Revised Article 3; the indorsee can enforce the instrument.

The courts will never presume a negotiation of order paper was intended; the parties must clearly indicate a negotiation or else the courts will presume an assignment was intended.

Identify the defenses that can be used against a holder in due course and those defenses that cannot be used against a holder in due course.

Sadie is the bookkeeper for the Binkly Construction Company.She makes out the payroll; prepares all of the payroll checks and reconciles the bank statements for the firm.She decides to increase her income by padding the payroll; accordingly, she makes out a check in the name of someone who does not exist.She then indorses the check with the payee's name and her name and cashes the check herself at First Bank where the company has its account.Under the fictitious payee rule, Binkly and not the bank will be liable for this check.

Tina forges Vivian's indorsement on a promissory note and negotiates it to Ned.If Vivian subsequently ratifies Tina's act, both Tina and Vivian are liable to Ned on the note and Vivian's ratification relieves Tina from civil liability to Vivian.

A restrictive indorsement:

A negotiation is void if the transaction in which it occurs is void.

Ricardo is the holder of a check that contains the indorsement "Without Recourse, (signed) Mary Roberts." This indorsement:

"Order paper" is negotiated by delivery only.

Indorsements with ineffective restrictions include which of the following?

The case, State of Qatar v.First American Bank of Virginia , held that:

Michael issues a check to Paula.She negotiates the check to Hal as payment for a used television set.Hal has no notice of any claims or defenses and takes the check in good faith.Hal indorses the check and gives it to his son as a birthday present.Is Hal's son a holder in due course? What rights does he have with respect to the check? If Michael has a defense of fraud in the inducement against Paula, can he use that defense against Hal or Hal's son?

Marty Sandidge wrote a check payable to "Charles Saxon" when the payee's real name was spelled "Charles Saxton." In order to obtain payment, Charles:

To acquire the preferential rights of a holder in due course, a person either must meet the requirements of the UCC or must inherit the rights under the shelter rule.

If the instrument is order paper, how can a person become a holder?

The requirements for negotiation are the same for both order paper and bearer paper.