Exam 25: Creating a Negotiable Instrument

With non-negotiable commercial paper,a transferee's rights are conditional.

Margo is in possession of a check issued to her by Felix.The check states,"Pay to the order of Margo." If Margo wishes to transfer the check to Pete to pay a debt she owes him,all she needs to do is strike out her name on the front of the check,write in Felix's name,and give it to him.

Felicia,an elderly woman,does not speak or read English well.Felicia is a recent immigrant to this country.A dishonest immigration officer tells Felicia to sign several documents as being necessary to maintain her legal immigration status.Unknown to Felicia,she signs a promissory note.The immigration officer thereafter sells the note to Neighborhood Bank,a holder in due course,who goes after Felicia for payment of the note.Felicia's defense to the Neighborhood Bank is

Sprock is a holder in due course on an instrument issued by Klingon.Which of the following defenses could be successfully raised by Klingon?

In which case would the holder in due course not receive payment?

The term "issuer"

A possessor of non-negotiable commercial paper has the same rights as the person who made the original contract.

Kent Weston wrote a check for $500 payable to the order of Chester Jones.Chester indorsed the back of the check as follows: "Chester Jones." The check is now

​There are three parties on a promissory note: the maker,the drawee,and the payee.

In June,The Seascape Gallery sells an oil painting to Collegiate Systems,Inc.Collegiate promises to pay for the painting in three months.The gallery prepares a draft ordering Collegiate Systems to pay $3,000 to First Bank on September 15.Collegiate Systems signs the draft.The draft is a

Because negotiable instruments are more valuable than non-negotiable ones,it is important for buyers and sellers to be able to tell,easily and accurately,if an instrument is indeed negotiable.What six standards must an instrument meet in order for it to be negotiable?

To be negotiable,a check must be in writing.Under the UCC,a check

TriColor purchased an industrial stamping machine from Vicy,Inc.TriColor paid for the machine with a negotiable note.The note was payable to the order of Vicy,Inc.Vicy,Inc.indorsed the note and gave it to CCLoans to satisfy a debt.CCLoans knew nothing about the contract between TriColor and Vicy,Inc.CCLoans indorsed the note and gave it to Great River Youth Club as a charitable donation.When Great River Youth Club presented the note for payment on its due date,TriColor refused to pay,claiming that the stamping machine was defective. (A)Is Great River Youth Club a holder in due course? (B)Will TriColor be able to avoid liability to Great River Youth Club on the basis that the machine was defective?

A bank that draws a check on itself has issued 

There are two types of commercial paper: express and implied.

Value means that the holder of an instrument

Under the UCC,a holder in due course is a holder who has given value for the instrument.Which of the following holders have given value for the instrument?

Sophie issues a promissory note made "payable to the order of Molly." Molly indorses the note by signing her name and gives the note to Dana.Which of the following is correct?

A & D,Inc.wrote a negotiable note payable to Vicy,Inc.for the purchase of some satellite receivers.A & D left the amount of the note blank because it was uncertain as to amount of the applicable tax.Vicy completed the note for $3,000 more than A & D actually owed for the receivers it purchased.The note was negotiated to a holder in due course.A & D will not have to honor the note as this constituted fraud in the execution.

Charlene Brown has possession of a check made out to the order of Charlene Brown (herself)which she received in payment for writing a manuscript for her publisher.Charlene is a holder in due course and the publisher cannot claim any "real" defenses to payment.Charlene has an unconditional right to be paid for the check.