Exam 29: Transfers of Negotiable Instruments and Warranties of Parties

Order paper can be converted into bearer paper by the holder's blank endorsement.

A restrictive endorsement specifies the purpose of the endorsement or the use to be made of the paper.

Order paper is negotiated by the indorsement of the holder and delivery.

If an assignment of an instrument takes place, the assignee:

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.

If a lost instrument is order paper, the finder __________.

Clark is the senior payroll clerk for the Gonzalez Corporation. In preparing the weekly payroll checks for the corporation, Clark added the name of Simmons to the payroll list. Clark knew that Simmons was not an employee of the corporation. Lewis, the treasurer of the corporation, signed the payroll checks and delivered them to Clark. Clark distributed all of the checks to the correct employees with the exception of the one made payable to the order of Simmons. Clark endorsed the name of Simmons to the check, cashed it with Diamond Check Cashing, and vanished. In this situation:

If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.

Under the UCC, a negotiation is not effective when it is made by a minor or any other person lacking capacity.

A transferor may be able to set aside a negotiation obtained by fraud or duress unless:

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

To enforce an implied warranty of an indorser, the party claiming under the warranty must give the indorser notice of the breach within fourteen (14) days after the claimant learns or has reason to know of the breach and the identity of the indorser.

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

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

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

A person who acquires the instrument on which the last endorsement is blank becomes the holder.

A payee or endorsee whose name is misspelled may endorse the wrong name, the correct name, or both.

When a negotiable instrument is assigned, the transferee has the rights of the transferor.

An instrument that originally was bearer paper always remains bearer paper.

Thomas, the holder of a check, presents it to the drawee bank for payment. If Thomas endorses the check, Thomas warrants that the account of the drawer in the drawee bank contains funds sufficient to cover the check.