Exam 25: Creating a Negotiable Instrument

To be negotiable, a check must be in writing. Under the UCC, a check

Value means that the holder of an instrument

The term "issuer"

A & D, Inc. wrote a negotiable note payable to Vicy, Inc. for the purchase of some satellite receivers. A & D left the amount of the note blank because it was uncertain as to amount of the applicable tax. Vicy completed the note for $3,000 more than A & D actually owed for the receivers it purchased. The note was negotiated to a holder in due course. A & D will not have to honor the note as this constituted fraud in the execution.

Laurel Speckle received a check from State University. She indorsed the check as follows: "For Deposit only, /s/ Laurel Speckle." Laurel's indorsement is a(n)

George's Wholesaling agrees to purchase 1,000 pounds of bananas from Chickadee Exports at 39 cents per pound. George's does not have the money for the bananas now, but promises to pay in two months. Chickadee Exports wants George's business but needs the money now. Chickadee (as drawer) prepares an instrument ordering George's (as drawee) to pay $390 to Primary Bank (the payee). This is an example of

Lucky loses in a high-stakes poker game to Fat Chance. To pay his debt, Lucky writes a check to Fat Chance, who negotiates the check to Convenient, who then tries to cash the check at Lucky's bank. Lucky has already stopped payment on the check, so the check is not honored by his bank. Convenient then tries to collect the check by suing Lucky. High-stakes poker games are illegal in this state. Which statement is correct?

A possessor of non-negotiable commercial paper has the same rights as the person who made the original contract.

An instrument is negotiable if it satisfies six standards. Which of the following is a standard of negotiability?

TriColor purchased an industrial stamping machine from Vicy, Inc. TriColor paid for the machine with a negotiable note. The note was payable to the order of Vicy, Inc. Vicy, Inc. indorsed the note and gave it to CCLoans to satisfy a debt. CCLoans knew nothing about the contract between TriColor and Vicy, Inc. CCLoans indorsed the note and gave it to Great River Youth Club as a charitable donation. When Great River Youth Club presented the note for payment on its due date, TriColor refused to pay, claiming that the stamping machine was defective. (A)Is Great River Youth Club a holder in due course? (B)Will TriColor be able to avoid liability to Great River Youth Club on the basis that the machine was defective?

With non-negotiable commercial paper, a transferee's rights are conditional.

Discuss the effect on an instrument of: (a) contradictory amounts between the numerals and amount written in words on a check; (b) the interest rate left blank on a promissory note; and (c) contradictory terms that are typed or printed onto a promissory note and terms that are handwritten.

Tyron purchased a $2,900 promissory note from Jared for the discounted amount of $2,500. Tyron paid value, in good faith and without notice of any outstanding claims against this promissory note that read, "Pay to the order of Jared $2,900 on July 1, 2009, for the purchase of a 2001 Ford Taurus provided no major problems with the car arise prior to said payment date." Tyron is a holder in due course of a negotiable note.

An indorsement is the signature of the

A bank that draws a check on itself has issued

Charlene Brown has possession of a check made out to the order of Charlene Brown (herself) which she received in payment for writing a manuscript for her publisher. Charlene is a holder in due course and the publisher cannot claim any "real" defenses to payment. Charlene has an unconditional right to be paid for the check.

Sophie issues a promissory note made "payable to the order of Molly." Molly indorses the note by signing her name and gives the note to Dana. Which of the following is correct?

Which is an unconditional order to pay?

The evening news was full of stories about how Levine sold fraudulent negotiable instruments to investors around the country. Two days later, Brighty, who did not hear the news reports, bought some of the fraudulent negotiable instruments from a swindled investor. Can Brighty claim the position of a holder in due course considering the publicity of the scam?

Generally, Rita signs her name using an infinity symbol rather than her legal name. Rita signed an instrument using this symbol. Which statement is correct?