Exam 29: Transfers of Negotiable Instruments and Warranties of Parties

A __________ indorsement consists of the signature of the indorser and words specifying the person to whom the indorser makes the instrument payable.

The situation in which an individual impersonates the holder of a savings account and, by presenting a forged withdrawal slip to the savings bank, receives from the bank a check payable to the bank's customer, is covered by the:

It is worse for the holder to lose order paper than to lose bearer paper.

A qualified endorsement qualifies the effect of a blank or special endorsement by disclaiming or destroying the liability of the indorser to answer for the default of the maker or drawee.

Coppersmith executed and delivered negotiable notes to the payee, Charlene. The payee endorsed the notes to Whitehurst but did not deliver them. Instead, she kept the notes in her possession because she wanted to collect the interest during her life and wanted the endorsee to have the notes on her death. After Charlene's death, her executor, Cartwright, found the notes. Both Cartwright and Whitehurst sought to enforce the notes against Coppersmith. Who was entitled to do so?

When a negotiable instrument is transferred by negotiation, the transferee is recognized as the holder of the instrument.

Al was an attorney in a small town and was very well-respected. A couple retained Al to represent them on the purchase of a home. Before closing, Al informed the couple of payments that they were required to make by check at the closing. Among the required payments the attorney told the couple to make were a check for $500 to Bob Brown and a check for $610 to Susan Lee. The attorney explained that the check to Brown was for a survey of the property and the check to Lee was for termite control work that the couple had authorized. The checks were issued and taken by Al who promised to deliver them. Al did not, however, deliver them. Instead, Al forged the endorsements of the respective payees and cashed the checks. When Al was later arrested on a similar matter, the couple learned what had happened. The couple made a claim against its bank for reimbursement, claiming the bank was not authorized to pay these checks because they had not been effectively negotiated to the bank. When the facts came to light, no person named Bob Brown had done a survey on the property, but the termite work had been done by Lee. Decide both cases.

If a negotiable order instrument is transferred to another party without an endorsement, the instrument has been:

The transferring of an instrument in such a way as to make the transferee the holder of the paper is termed:

An endorsement "for deposit only" is:

When a negotiable instrument is negotiated by delivery without indorsement, the warranty liability of the transferor runs only to the immediate transferee.

The order or bearer character of a paper is determined as of the time when the negotiation is about to take place.

A special endorsement consists of the signature of the indorser and the words identifying the person to whom the indorser makes the instrument payable.

If an instrument bears a restrictive endorsement, any further transfer or negotiation is effectively barred.

A thief or an embezzling officer cannot legally transfer title to a bearer instrument.

If an instrument is drawn in favor of an officer of a named corporation, the instrument is payable to the corporation, the officer, or any successor to such officer.

When the holder fails to endorse order paper but does physically transfer the paper to a third party, the transferee is considered an assignee not a holder.

In the case of a check, when the impostor rule applies:

The warranties made by an unqualified indorser guarantee that payment of the instrument will be made.

An endorsement "Pay to Donald Hames, Cathy Dukes" is not valid as an endorsement because it does not contain the words "order" or "bearer."