Exam 27: Transfer and Holder in Due Course

An indorsement must be written within 1 1/2 inches of the trailing edge of the back of the check and must be written in ink or the check's negotiability is destroyed.

An indorsement stating "Pay Paula Hobson only":

A negotiation is void if the transaction in which it occurs is void.

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

A check is made payable "to the order of Sam Johnson." If this check is indorsed by Sam Johnson and given to Alex, Alex becomes the holder of the instrument.

One who is in possession of a negotiable instrument that is drawn, issued, or indorsed to him or to his order or that is indorsed in blank is a(n):

Miller does the payroll for XYZ Company. In between Adams and Bates, he inserts the name Appleton and makes out a weekly paycheck in that name. He keeps the check for himself, signing "Appleton" and cashing it at a local bank. Auditors discovered the fake payee many months later. May XYZ require the bank to recredit?

Answer the following: a. What is negotiation? How does one become a "holder" of an instrument? b. What is the difference between "transfer" and "negotiation"? Explain. _{Negotiation is the voluntary or involuntary transfer of an instrument by a person}

Michael issues a check to Paula. She negotiates the check to Harold as payment for a used television. Harold has no notice of any claims or defenses and takes the check in good faith. Harold indorses the check and gives it to his son as a birthday present. a. Is Harold's son a holder in due course? Explain. b. What rights does Harold's son have with respect to the check? Why? Explain. cAssume that Michael has a personal defense of fraud in the inducement against Paula. Can he use that defense against Harold? Can he use that defense against Harold's son? Explain.

An indorsement may be written on a paper other than the instrument itself as long as the paper with the indorsement is affixed to the instrument.

The refusal to pay or accept an instrument when it becomes due is:

Which of the following are not types of restrictive indorsements?

Which one of the following is not a personal defense?

Blane indorsed his paycheck in blank and cashed it at a store where he was a well-known customer. The check was then stolen from the store. The store immediately notified Blane's employer, who gave the drawee bank a stop payment order. The thief indorsed the check in a false name and transferred the check to a gas station/convenience store, which took the check in good faith and for value. The check was dishonored when presented to the drawee bank. Which of the following statements is true?

Under Article 3, the employer is allowed to recover from its bank, despite the applicability of the fictitious payee rule, if the bank failed to exercise ordinary care in paying the instrument.

The fictitious payee rule is based on the idea that employers should bear the risk of their own unscrupulous employees.

The status of holder in due course was created to encourage the free transferability of negotiable instruments.

Which of the following is a special indorsement?

What are the requirements for a transferee of a negotiable instrument to be a holder in due course?

Revised Article 3 adopts a definition of good faith that has both a subjective and an objective component.