Exam 28: Liability of Parties

Presentment for payment is one step necessary to charge an indorser with the obligation to pay.

What warranties are given by presenters depend upon who is the payor or acceptor.

If a drawee bank pays an instrument containing a forged indorsement, the bank is liable for conversion.

By paying the holder on an instrument, a party may be discharged from liability.

Parties that are usually secondarily liable for an instrument are: a. indorsers and drawers. b. makers and indorsers. c. makers and acceptors. d. acceptors and drawers.

Zoron Company purchased a truck from Ace Motors. The sales personnel at Ace know that Anton Green is an executive at Zoron. To pay for the truck, Anton delivered a $35,000 note to Ace and signed it "Anton Green, Agent." In this case:

Discharge of liability on an instrument is final; it cannot be revived.

Once a check is issued, the drawee bank becomes primarily liable.

The signature of the maker of a note may be typewritten or by means of a signature stamp so long as it represents an intention to authenticate the instrument.

In the banking system, the time for dishonor of a check can vary greatly depending on the number of banks involved in the collection process.

Brad wrote a check to Clara for $1,000 on his account at First Bank. He then took it to his bank for certification. The bank wrote "certified" on the face of the check. Brad then gave the check to Clara. When Clara took the check to First Bank, they refused to pay, claiming that there was not enough money in Brad's account to cover the check. Which of the following is correct?

Notice of dishonor of an instrument:

Philip uses a signature stamp to sign his checks and carelessly leaves it accessible to third parties. Jeremy finds the stamp and uses it to write several checks without Philip's authorization. Renee, who takes a check for value and in good faith, will be subject to Philip's defense of unauthorized signature.

If a person entitled to enforce an instrument refuses a tender of payment, the refusal wholly discharges to the extent of the amount of tender every party who has a right of recourse against the party making tender.

Ralph is the payee of a negotiable promissory note on which Brian is the maker. Ralph indorses the note in blank and delivers it to Clark, who then transfers it to David without indorsement. David presents it to Brian for payment when it becomes due, but Brian claims he signed the note based upon fraud in the inducement and refuses to pay. a. Who is primarily liable on the instrument? Who is secondarily liable on the instrument? b. Who has warranty liability? Why? Explain. c. From whom can David try to collect?

If an agent is authorized to execute an instrument on behalf of a principal and signs "Cornwall, principal, by Lyons, agent," only the principal is liable on the instrument.

In all instances other than a drawee of an unaccepted draft or uncertified check, the only presentment warranty that is given is that the warrantor is a person entitled to enforce the instrument or is authorized to obtain payment on behalf of the person entitled to enforce.

If a holder presents a note for payment to the maker, which one of the following warranties is given?

Notice of dishonor is waived if presentment has been waived.

Presentment is excused where the acceptor is undergoing bankruptcy.