Exam 27: Liability, Defenses, and Discharge

A person who signs an instrument without authorization can be held personally liable for payment by a holder in due course.

Fact Pattern 27-1B (Questions B6-B7 apply) Charlton is the maker of a $200,000 promissory note payable to Development & Sales Corporation. Development & Sales indorses the note to Equity Lenders, which in turn indorses it to First Select Investors, which then in?dorses it to Global Bank, the present holder. -Refer to Fact Pattern 27-1B. Global Bank properly pre?sents the note to Charlton for pay?ment, but he dishonors it. With timely notice to the proper parties, Global Bank may collect payment on the note from

Gulf Bank receives a check drawn by Hayward. The check is re?ceived af?ter the established "cutoff" hour. Payment can be postponed without dishonor

Kurt writes a check on his account at Liquidity Bank to Mandy, a fa?mous singer. The person claiming to be Mandy is an imposter, however, named Nila. Nila indorses the check to Outsize Portions, a casino, restaurant, and nightclub, for which Liquidity Bank cashes it. Ultimately, the loss will most likely fall on

Even if a promissory note is incomplete at the time a maker signs it, the maker is still obligated to pay.

In some situations, the unauthorized indorsement of a payee's name can be as effective as if the real payee had signed.

Notice of dishonor can be given in any reasonable manner, including notice written or stamped on the instrument itself.

Duke signs a note "payable to the order of Equity Bank." Unless Duke has a valid defense against payment, his liability on this note is

Fiona writes a check "pay to the order of Gerri" drawn on Fiona's account at Home State Bank. Gerri presents the check for payment to Home State, which ac?cepts it. Primarily liable on the check is

Fact Pattern 27-1B (Questions B6-B7 apply) Charlton is the maker of a $200,000 promissory note payable to Development & Sales Corporation. Development & Sales indorses the note to Equity Lenders, which in turn indorses it to First Select Investors, which then in?dorses it to Global Bank, the present holder. -Refer to Fact Pattern 27-1B. Suppose that First Select pays Global Bank on the note. With timely notice to the proper parties, First Select may then collect payment on the note from

If delivery of goods becomes impossible, a party who has issued a draft or note under the contract has a defense for not paying it.

Dulcey agrees to cosign a promissory note for Excavation Equipment Leasing & Sales to buy a backhoe. The note is payable to Federal Bank. Dulcey is an accommodation

Warranty liability arises only when a transferor indorses the instrument.

The forgery of a signature on an instrument is a valid defense against all holders except HDCs and holders through HDCs.

Lewis makes a note payable to MaxiFinance Corporation. MaxiFinance indorses the back of the note and negotiates it to Notes & Drafts Investments, Inc. Primarily liable on the note is

An indorser is secondarily liable on an instrument.

When a negotiable instrument contains the notice required under FTC Rule 433, a consumer can bring any defense to payment that he or she has against the seller of a product against a subsequent holder as well.

All parties to a negotiable instrument will be discharged when any party liable on it pays to a holder the full amount due.

Orson signs a check "pay to the order of Painless Dental" drawn on Orson's account in Quantum Bank. To impose liability on Orson if the bank dishonors the check, Painless Dental should present it for payment within

An unauthorized signature is wholly inoperative and will not bind the person whose name is signed or forged.