Exam 26: Liability for Negotiable Instruments

The accidental destruction of a negotiable instrument will not result in its cancellation.

An indorser who writes "without recourse" next to her signature on a negotiable instrument is not liable for payment.

Mack writes a check to his maid,Marianne,in payment for services rendered.Marianne indorses the check in blank and gives the check to her masseuse,Janet,in exchange for a neck massage.Without indorsing the check,Janet gives the check to Martin,her newspaper carrier,in payment for the next four months' delivery charges.Martin indorses with a special indorsement and negotiates the check to his church,St.Mark.The church indorses the check and deposits it in its bank account.If Mack's bank later dishonors the check,to whom may St.Mark's look for recovery?

List and explain the five different ways to discharge an instrument according to Article 3 of the UCC.

Lance indorses a promissory note to Connie in exchange for consideration.Unknown to Lance,the note is not good because the maker's signature was forged.Connie later attempts to present the instrument for payment to the original alleged maker,Lilly,who is able to deny liability for payment due to the forged signature.Connie may later sue Lance for breach of a transfer warranty.

Which of the following will discharge an instrument?

Drawers and indorsers are secondarily liable on negotiable instruments.

When signing a company check,an agent must clearly indicate that he or she is signing on behalf of the company in order to be free of liability.

Nelson writes Leah a check for mowing his lawn.Leah deposits the check in her bank,but it is not paid by Nelson's bank.Leah calls Nelson to notify him that her bank returned his check to her unpaid.Leah's notice of the dishonor is insufficient;she must provide written notice.

Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.

Which of the following statements regarding instrument liability is TRUE?

Negotiable instruments are normally issued to fulfill a contract.

Which of the following parties has primary liability on a draft?

List the warranties a transferor of a negotiable instrument makes.

Paula is a sales agent for The Rock Insurance Company.Paula accepts a check from a customer made payable to her in payment for the premium on an insurance policy.Prior to depositing the check in The Rock's bank account,Paula indorses the check as follows: "The Rock Insurance Company,by Paula Beck,agent." Assuming that Paula has authority to indorse company checks,if the check is dishonored,then between Paula,The Rock,and the bank

James Packard,a lawyer representing Robert Marino,received a check for $16,000 in settlement of Robert's case.Instead of turning over the money to Robert or putting it into a trust fund for him,James forged Robert's indorsement and deposited the money into his own account without notifying Robert.Discuss the claims the parties have.

If an employee with responsibility for issuing instruments forges a check or other instrument,then any indorsement in the name of the payee,or a similar name,is valid as long as the person who pays the instrument doesn't know of the fraud.

Lana wrote a check knowing that she did not have sufficient funds in her account.What is this practice called?

Tom indorsed a check made payable to the order of Tom Jones as follows: Raymond negotiated the check to his landlord for his rent.Raymond indorsed the check as follows: With regard to Tom's indorsement,which statement is correct? Pay Raymond Berry /s/ Tom Jones Without Recourse /s/ Raymond Berry

Verne has possession of a draft that has been validly negotiated to him.His payment process necessarily includes