Exam 21: Negotiable Instruments: Transferability Liability

On April 1 Richard arranges to buy a sixteen-speed bike from his neighbor Phil for $500. Phil agrees to deliver the bike on May 1. Richard writes a draft for $500 payable to Phil on May 1. In this situation, the draft is a

Commercial Credit Company has in its possession an instrument dated May 1, 2012. The instrument is payable to the order of Alpha Company "on June 1, 2013," for $5,000. In the upper left corner is an address for Beta Corporation-10 Corporate Park Avenue, Chicago, Illinois-and in the lower right corner is the signature of "Delta, Inc., By Eve, President." In the lower left corner is stamped "ACCEPTED: Beta Corporation by Frank, President, May 5, 2012." On the back is the signature of "Alpha Company By Gail, President." Who, if anyone, is primarily liable on this instrument on May 1? On May 5? Who, if anyone, is secondarily liable on this instrument?

Eppie gives a check to Fund Investments to buy 100 shares of stock in GR8 Tech Corporation for Eppie. The price of the shares is constantly fluctuating. Fund Investments asks Eppie to leave the amount of the check blank and allow it to fill in the price when making the purchase. Eppie agrees. Fund Investments buys the stock when the price is $4,000, but fills in the check for $5,000. The check is negotiated as payment for a $5,000 debt to Hasty Accounting Services, which takes the check in good faith and without no?tice of Fund Investments' act. Hasty later learns that Fund Investments was not author?ized to fill in the check for $1,000 over the price. Is Hasty an HDC? If so, for how much?

To be negotiable, an instrument must be payable in a fixed amount.

Opalina asks Paolo, who does not understand English, to sign what Opalina says is an application to open a bank account. In fact, the "application" is a note. If sued on the note by an HDC

When an instrument is dishonored, only written notice is sufficient to hold secondary parties liable.

Stating on an instrument the underlying terms of an agreement renders the instrument nonnego?tiable.

An instrument payable "with ten hours of services" is negotiable.

A bearer instrument is an instrument that does not designate a specific payee.

Personal defenses are used to avoid payment to an ordinary holder of a negotiable instrument, but not to an HDC or a holder through an HDC.

A time draft is payable on sight.

A drawer who is induced by an imposter to issue a check in the name of an impersonated payee can avoid payment on the check to an innocent holder.