Exam 23: Negotiable Instruments: Transfer and Liability

A holder takes an instrument for value if he or she plans to pay for the instrument later.

A person who signs an instrument without authorization can be held personally liable for payment.

A person is liable on an instrument only if he or she has signed it personally.

Cici signs a check "pay to the order of Doug" drawn on Cici's account in East Bank. Cici shows the check to Frieda, who agrees that the signature is Cici's and that Doug is owed the amount the check represents. Doug signs the back of the check. Liability on this check extends to

Jack pays Kelly in good faith for a promissory note. Kelly warrants that the note has not been altered. This is

Talia, who is not an Urban Bank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if Urban Bank

An instrument is not defective simply because there is a defense against it or a claim to it.

Fact Pattern 23-1 Lisa writes a check on her account at Metro Bank to Niklas to pay a debt. Niklas negotiates the check by indorsement to O'Leary, who presents it for payment to Prime Bank. Refer to Fact Pattern 23-1. I f Prime Bank dishonors the check, O'Leary can obtain payment from Niklas

Presentment can be properly made by any commercially means.

Logan is Mining Corporation's agent and is authorized to write checks on Mining's account in Northwest Bank. Logan writes a check "pay to the order of Oceanside Resort." Logan signs the check "Mining Corporation, by Logan, agent." Northwest Bank dishonors the check. Liability extends to

A holder does not take an instrument for value if he or she receives it as a gift.

In the event that there is a conflicting, superior claim to an instrument, holder in due course will not be able to collect payment.

Olivia is Physicians Clinic agent and is not authorized to sign checks or notes on its behalf. Despite the lack of authority, Olivia issues a note "payable to the order of Loan Company [signed] Physicians Clinic, by Olivia." Liability on this note extends to

Darby writes a check to Education Loan Management, Inc., that is drawn on Darby's account at Federal Bank. If the bank does not accept the check, liability for its amount is on

Len makes a gift of a check to Millie who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Millie is

Mark performs moving services for Nell, who pays him with a promissory note for $400. Mark is aware that there are bankruptcy proceedings against Nell. Mark is

Edna is the payee of a bearer instrument-a promissory note in the amount of $10,000. Flem offers to irrigate Edna's ranch next week in exchange for the note. She agrees and delivers the note to Flem. Flem is

Calvert buys a promissory note from Darin. The note is due on December 5. December 5 is a Sunday. The note is

Every party who signs a negotiable instrument is primarily liable for payment of that instrument when it comes due.

Owen is a holder of a promissory note obtained from Purchase Money, Inc.  Regarding the defenses against payment of the note to which Purchase Money is subject, Owen, as an ordinary holder, is subject to