Exam 25: Transfer and Holder in Due Course

Silas deposits his paycheck in First American Bank without indorsing it.First American cannot become a holder until Silas completes the indorsement.

Which of the following is required regarding indorsements?

Every indorsement is either blank or special.

Phyllrox Co.,a large manufacturer,purchased a forklift from Brown's Equipment Co.Phyllrox made a down payment in cash and signed a promissory note for $7,500.For $7,200 Brown's sold the note to Corporate Bank,who took it in good faith without notice of any problems with it.After Phyllrox used the forklift for two weeks,it broke down and could not be repaired.Phyllrox refuses to make any more payments to Corporate Bank.In this case:

Marie is the bookkeeper for the Buildco 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,Buildco and not the bank will be liable for this check.

The principal advantage of negotiable instruments is their legitimacy.

Federal Reserve Board guidelines for checks:

A qualified indorsement destroys negotiability.

Jill issues a negotiable promissory note to Cherice,who indorses it and delivers it to Lee.If Lee knows that the note was given to Cherice in exchange for worthless securities,Lee cannot be a holder in due course.

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.

Jennifer,who stole a check "payable to cash," cannot be a holder since she did not receive possession by voluntary transfer.

The transfer of a nonnegotiable promise or order operates as an assignment.

The transfer of a negotiable instrument in such a manner that the transferee becomes a holder is known as:

Laura is in possession of a check which contains the following indorsement,"Sam Smith,without recourse,for collection only." The indorsement would be classified as:

An indorsement "for deposit" is a collection indorsement.

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

Revised Article 3 provides that the impostor rule does not include an impostor who impersonates an agent of a principal and who induces someone to create a negotiable instrument payable to the principal.

A(n)___________ is the voluntary transfer to a third party of the rights arising from a contract.

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

Time paper that states it is due on July 1,which is a Sunday,is overdue on: