Exam 21: Holder in Due Course and Liability of Parties

A person cannot be held contractually liable on a negotiable instrument unless his or her signature appears on it.

A holder in due course takes negotiable instrument free form personal defenses but not real defenses.

A drawer or maker is generally liable for payment on a forged indorsement of a fictitious payee.

There are two (2)types of implied warranties: transfer warranties and accommodation warranties.

Under the Uniform Commercial Code,value has been given if the holder gives an irrevocable obligation as payment.

Cancellation of a negotiable instrument may be accomplished by the holder's destruction or mutilation of the instrument with the intent of eliminating the obligation.

Under the Uniform Commercial Code,value has been given if the holder performs the agreed-upon promise.

Which of the following parties are liable only after a negotiable instrument has been presented and dishonored,and proper notice has been given?

Assume Susie borrows $500 for school tuition from Sneaky Slim and gives him a note for that amount payable with interest in the amount of $25 due in one year.Slim cleverly alters the note to say $5,000 with interest of $500 due in one year.Slim then negotiates the note to Alice who negotiates it to Bob.A year later,Bob asks Susie for payment of $5,500.Who is liable to whom for payment,and for how much?

John writes a check,making it payable to Jane Smith.Before Jane indorses the check,Ralph steals it,forges Jane's indorsement,and cashes it at the local grocery store.John's bank charges this check against John's account.John learns of the forgery and complains.Who is ultimately liable for this loss,assuming Ralph cannot be found?

Can transfer warranties be disclaimed?

Warranty liability is not dependent on one's signature.

________ warranties cannot be disclaimed with respect to checks,but they can be disclaimed with respect to other instruments.

A holder is any person in possession of a negotiable instrument.

Jon is a holder in due course of a negotiable instrument and gives the instrument to Sarah as a Valentine's Day gift.

Payees generally do not meet the requirements for being a holder in due course,because they know about any claims or defenses against the instrument.

With respect to negotiable instruments,the "red light doctrine" prevents a holder from being a holder in due course if the holder has knowledge of a defense to the payment of the instrument.

A holder who takes an instrument with notice of its dishonor cannot qualify as a holder in due course.

In terms of the requirements for becoming a holder in due course,"good faith" means honesty in fact in the conduct or transaction concerned.

Signature liability on a negotiable instrument is also known as: