Commercial Paper – Transfer
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Shelter Rule
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Transferee gets transferor's rights
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Holder
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One who is in possession of a piece of CP that is drawn, issued, and endorsed to him or endorsed in blank. Possessor of an instrument with all necessary endorsements
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Transfer of Bearer Paper
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Give possession to holder
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Transfer of Order Paper
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Give possession (DELIVERY) and all necessary endorsements to holder
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Endorsement defenses
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- Title = ownership - Warranty = Statement of fact which incorrect will be corrected - Guaranty = third party correcting discrepancy
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Accommodation endorsement
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= Guaranty signatures - A written agreement from one entity to back the credit liability of another. - Friend can do it, ADDS CREDIBILITY
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Blank endorsement
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One specifying no endorsee and making the instrument BEARER PAPER
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Special endorsement
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One designating an endorsee (A NAME) to be paid and making the instrument ORDER PAPER
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Restrictive endorsement
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Places a limitation on the use of a negotiable financial instrument. The most common restrictive endorsement is the phrase \"For Deposit Only\" written along with the payee's signature on the back of a check.
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Conditional endorsement (Restrictive)
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Endorsee's right to payment is made subject to a condition, a happening of an event
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Deposit or Collection endorsement (Restrictive)
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Effectively limit negotiation to those consistent with the endorsement - CAN'T GO TO ANYONE ELSE
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Trust endorsement (Restrictive)
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Require endorsee to pay or apply all funds in accordance with the endorsement (HOLDING $ FOR CLIENTS AND TRANSFERRING IT TO SPECIFIED PERSONS)
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Qualified endorsement
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Adds certain words which limit, qualify, or restrain the endorser's LIABILITY.
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Qualified endorsement - \"Without Recourse\"
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Signifies that the endorser shall not be liable if the instrument is dishonored - Limits endorsers liability - Higher interest rates and must have good credit
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Qualified endorsement - \"With Recourse\"
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Holdee can receive payment on CP from anyone who has signed it if the individual who originally made it is unable, or refuses, to tender payment
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Example: \"John Doe\"
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1. Type of endorsement = Blank 2. Interest transferred = Nonrestrictive 3. Liability of endorser = Unqualified
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Example: \"Pay to R. Roe, John Doe\"
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1. Type of endorsement = Special 2. Interest transferred = Nonrestrictive 3. Liability of endorser = Unqualified
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Example: \"Pay to R. Roe, without recourse, John Doe\"
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1. Type of endorsement = Special 2. Interest transferred = Nonrestrictive 3. Liability of endorser = Qualifed
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Example: \"Pay to XYZ Bank, for collection only, John Doe\"
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1. Type of endorsement = Special 2. Interest transferred = Restrictive 3. Liability of endorser = Unqualified
