Exam 26: A: Liability,defenses,and Discharge

An unauthorized signature will not bind the person whose name is signed even if his or her negligence substantially contributed to the forgery.

Intentional cancellation of an instrument discharges the liability of all parties.

Biff signs a note "payable to the order of County Credit Union." Unless Biff has a valid defense against payment,Biff's liability on this note is

Delores's Restaurante borrows $100,000 at 6 percent interest from El Credito y Dinero Company and signs a promissory note for that amount.El Credito changes the amount of the note to $120,000 and increases the rate to 8 per?cent.Delores's best defense against payment on the note is

Kris is an administrative assistant with Little Financial Corporation,but has no authority to sign Little Financial checks.Kris orders merchandise from My-T-Fine Retail Company delivered to her home and pays with a Little Financial check,signing "Little Financial Corp.by Kris,admin.assist." My-T-Fine does not know that Kris has no authority to sign the check.Who is liable on the check,and why?

On January 1,Kane issues a note payable to Lorena on May 1.On April 29,Kane dies.In this situation,the note is

Universal defenses are good against all holders except HDCs and holders through HDCs.

Cole issues a note "payable to the order of Cole," forges Dylan's signature as the maker,and indorses the note "pay to Eton." Cole sells the note to Eton,who negotiates it by indorsement and delivery to Franz.Franz negotiates the note to Gert.On this note,Gert can extend liability to

If delivery of goods becomes impossible,a party who has issued a draft or note under the contract must still pay it.

The dishonor of an instrument relieves secondary parties of liability.

Molly signs a promissory note payable to Nano Credit Corporation while mentally incompetent but before a court judges her to be mentally incompetent.The note is

When there is a breach of an underlying contract for which an instrument was issued,the maker of a note can refuse to pay it.

Rex signs a check "pay to the order of Sophie" drawn on Rex's account in Town Bank.To impose liability on Rex if Town Bank dishonors the check,Sophie should present it for payment within

A person who issues a negotiable instrument based on false statements by the other party will be able to avoid payment on that instrument to any party.

When an instrument has a forged indorsement,the loss usually falls on its maker or drawer.

Every person who signs a negotiable instrument is liable for payment of that instrument when it comes due.

Commercial Credit Company has in its possession an instrument dated May 1,2009.The instrument is payable to the order of Alpha Company "on June 1,2009," 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 5,2009." 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?

Fact Pattern 26-1B Jake is the maker of a $2,000 promissory note payable to Kim.Kim indorses the note to Lyron who,in turn,indorses it to Mona,who then in?dorses it to Neville,the present holder. -Refer to Fact Pattern 26-1B.Suppose that Mona pays Neville on the note.With timely notice to the proper parties,Mona may collect payment on the note from

A drawer is secondarily liable on an instrument.

An unauthorized signature never binds the person whose name is signed.