Exam 26: Liability of Parties

All people who obtain payment or acceptance of an instrument as well as all prior transferors give the presenter's warranties.

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

Morgan is the maker of a promissory note payable to Hillary on August 29.If Hillary fails to make proper presentment of the note to Morgan on August 29, Morgan's liability on the note is not affected.

The time for dishonor of a check can vary greatly depending on the number of banks involved in the collection process.

Sarah has a checking account at First Bank.Orrin steals one of her blank checks, writes a check for $250 to himself, and then forges Sarah's signature.Orrin then indorses the instrument to Paul in payment of a debt.Paul, who does not know of the forgery, presents the instrument to First Bank for payment.At First Bank's request, Paul indorses the instrument, and the bank then pays him $250.Which of the following is correct?

Unauthorized signatures include both forgeries and signatures made by an agent without authority.

a.What warranties are given by an indorser? b.What warranties are given by a transferor by delivery without indorsement? c.If a person has no contractual liability on the instrument, does that mean he has no liability as a result of the transaction involved? Explain.

Arthur is the payee of a negotiable promissory note on which Brian is the maker.Arthur 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 now that Brian refuses to pay?

Under Revised Article 3 of the UCC, failure to give notice of dishonor will discharge the drawer from having to pay on the instrument.

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?

Discharge applies to the individual, not to the instrument, and a person's liability may be discharged with regard to one party but not to another.

Thomas is the treasurer of Oklaw, Inc.He has authority to sign on behalf of the company.One day, he signs a note as follows: "Thomas Maurtin, as treasurer." The company's name does not appear on the note.Is the company liable on the note? Is Thomas liable on the note? Explain.

In which of the following situations has conversion NOT occurred?

"Presentment" is necessary within 10 days of the date of issuance of a check.

Parties that are usually secondarily liable for an instrument are:

Presentment is excused where the acceptor is undergoing bankruptcy.

An accommodation party is a direct beneficiary of the value received from lending her credit on an instrument.

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

Which of the following is true of warranty liability as it affects negotiable instruments?

On the due date, Merrel makes proper tender of full payment of a note to Russell, who is entitled to payment.If Russell refuses payment, Merrel is discharged from liability for: