Exam 20: Creation and Transfer of Negotiable Instruments

Promissory notes that are secured by real estate are called collateral notes,and notes that are secured by personal property are called mortgage notes.

An indorsee who does not comply with the instructions of a restrictive indorsement is liable only to the maker for any losses that occur.

The holder of an instrument wants that instrument to be paid to a particular person,wants to be sure that the proceeds from the instrument are deposited in that individual's account,and does not want to be liable to that person in the event that the instrument is not paid.What can the holder do to accomplish this?

Promissory notes can be made payable to a named payee or to bearer.

A qualified indorsement is created by placing a notation such as "without recourse" or other similar language that disclaims liability as part of the indorsement.

The mere acknowledgement of a debt is sufficient to constitute a negotiable instrument.

The concept of negotiation is unimportant to the law of negotiable instruments.

Bob has received a check in the amount of $1,000 from his brother.Bob's brother is not the most reliable person in the world.Bob would like to donate the $1,000 to a charity,but does not want to make the donation if the check from his brother ends up not being paid.Bob knows that he could wait to see if the check from his brother clears the bank,but Bob wants to make the donation today.Bob also says he wants the organization to use the money and does not want it to be transferred to any other party.How could Bob accomplish these goals?

Paul and Mary have just purchased a home.Peter,thinking he is smarter than Paul and Mary,writes a check to them for $1,000 in icing on a cake he brings to their housewarming.Peter believes that the cake would be a nonnegotiable item.Is he correct? Is there any way that Paul and Mary can cash the "check"?

An agent of a corporation who signs a negotiable instrument on behalf of a corporation is always personally liable.

Why are there so many different kinds of indorsements? Why is a restriction in an indorsement that limits payment to the named payee not effective? Should not the parties be allowed to set these terms between themselves?

A check is a specific form of draft that involves a bank.

A bearer instrument is payable to anyone in physical possession of the instrument who presents it for payment when it is due.

Substantial risk is associated with the loss or theft of bearer paper

It is payday,and Jane receives her paycheck and heads to the bank to deposit the check.Before leaving her office she signs the check with a blank indorsement.When she arrives at the bank she realizes that she has lost the check. A.If Mike finds the check,what rights does Mike have? B.How could Jane have indorsed the check to give herself the best protection from accidental loss or theft?

A time draft is payable on sight.

Negotiable instruments often serve as record-keeping devices.

Instruments that are payable at a definite time are called demand instruments.

If there is no room for indorsement on an instrument,the indorsement may be written on a separate piece of paper called ________.

The words of negotiation,"pay to the order of," are needed for a special indorsement.