Exam 23: Liability for Negotiable Instruments

When a person indorses a check,the indorser assumes contractual liability based on the indorsement.This liability expires unless presentment is made:

An agent must clearly indicate that he or she is signing on behalf of a principal in order to bind the principal.

Anyone who presents a check for payment warrants all EXCEPT:

Olga draws a check payable to Sven.Sven indorses the back of the check "without recourse" and negotiates the check to Hansel who in turn negotiates the check by a blank indorsement and delivers the check to Gretta.Gretta deposits the check in her checking account.If the bank dishonors the check because Olga has filed for bankruptcy,and returns the check to Gretta,who has liability on the check?

The Gulf States Section,PGA,Inc.v.Whitney National Bank of New Orleans case addressed liability on a negotiable instrument:

Tom indorsed a check made payable to the order of Tom Jones as follows: Pay Raymond Berry /s/ Tom Jones Raymond negotiated the check to his landlord for his rent.Raymond indorsed the check as follows: Without Recourse /s/ Raymond Berry

Which of the following statements concerning check kiting is true?

Lance indorses a promissory note to Connie in exchange for consideration.Unknown to Lance,the note is not good because the maker's signature was forged.Connie later attempts to present the instrument for payment to the original alleged maker,Lilly,who is able to deny liability for payment due to the forged signature.Connie may later sue Lance for breach of a transfer warranty.

Micah signed a check in the lower right-hand corner and Andrew signed on the back.The presumption is that:

List the warranties a transferor of a negotiable instrument makes.

To pay for a minor repair,May writes a check for $50 to David,who indorses the check in blank and gives it to his sister,Glenda,for her birthday.She indorses the check in blank and gives it to her trash collector to pay her quarterly bill.Which of the following is correct?

Cecilia made a check out to Gideon for $15.Gideon fraudulently changed the check to read $150,and cashed it at Corner Bank.Is Cecilia discharged from liability on the check?

Which of the following statements is true concerning an accommodation party?

A person who adds her signature to an instrument for the purpose of being liable on it is an accommodation party.

Suppose that Emmett impersonates a famous clown.He goes into an advertising agency and convinces the manager to issue a check to him in the name of the famous clown,purportedly as part of a fund-raising campaign for a nursing home for old retired clowns.If Emmett negotiates the check to a check-cashing store by forging the name of the famous clown,then the ad agency will be able to argue that the bank must reimburse the account because the bank paid a check on a forged signature.

Mack writes a check to his maid,Marianne,in payment for services rendered.Marianne indorses the check in blank and gives the check to her masseuse,Janet,in exchange for a neck massage.Without indorsing the check,Janet gives the check to Martin,her newspaper carrier in payment for the next four month's delivery charges.Martin indorses with a special indorsement and negotiates the check to his church,St.Mark.The church indorses the check and deposits it in its bank account.If Mack's bank later dishonors the check,to whom may St.Mark's look for recovery?

Dwight Stringer signed three promissory notes as an agent for his company.The first,he signed "Dwight Stringer,agent for Park Systems,Inc." The second,he signed "Dwight Stringer,Agent." The third note was signed merely "Park Systems,Inc." Discuss the liability of Dwight and Park Systems,Inc.on each of the notes.

Explain when presentment warranties apply.Identify the presentment warranties on a check and a promissory note.

Maurina is an agent of Southland,and she is authorized to sign checks on Southland's bank account.If Maurina signs a check without indicating that she is simply an agent,Maurina will be personally liable on the check.

Paula is a sales agent for The Rock Insurance Company.Paula accepts a check from a customer made payable to her in payment for the premium on an insurance policy.Prior to depositing the check in The Rock's bank account,Paula indorses the check as follows: "The Rock Insurance Company,by Paula Beck,agent." Assuming that Paula has authority to indorse company checks,if the check is dishonored,then between Paula,The Rock,and the bank: