Exam 29: Transfers of Negotiable Instruments and Warranties of Parties

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

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

An endorsement "for deposit only" is:

If an instrument is payable to alternative payees or if it has been negotiated to alternative indorsees, it may be indorsed and delivered by either of them.

When a special endorsement is made, the instrument becomes order paper and may be negotiated only by an endorsement and delivery.

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.

The implied warranties of an unqualified indorser do not include a guarantee that:

A blank endorsement indicates the person to whom the instrument is to be paid-that is, the transferee.

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:

When the indorser merely signs a negotiable instrument, the indorsement is called a __________ indorsement.

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

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

A blank indorsement turns a(n) __________instrument into a(n) __________ 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.

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

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

If a lost negotiable instrument is in bearer form at the time of the loss, the finder is entitled to enforce payment.

When a negotiable instrument is negotiated by delivery without indorsement, the warranty liability of the transferor runs:

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

An instrument may be transferred by negotiation or by assignment.