Business Law, Text and Cases, Thirteenth Edition, Chapter 26 – Flashcards

a preexisting obligation

does not specify a particular indorsee and can consist of a mere signature

takes an instrument free of most of the defenses and claims that could be asserted against the transferror (pg. 502)

the person to whom the check is indorsed and delivered

a signature with or without additional words or statements

a person who transfers a note or a draft by signing (indorsing) it and delivering it to another person

the transferee (the person to whom the instrument is transferred) becomes a holder (a holder receives the rights of the previous possessor)

when an indorser wants to disclaim the liability on an instrument; example: an insurance agent receives a check made payable to herself, but the money is supposed to go straight to the insurance agency, so she writes "pay to Insurance Agency, without recourse, (signed) __Insurance_Agent__" and then she won't be held liable to pay the agency if the client's check bounces

requires the indorsee to comply with certain instructions regarding the funds involved but does not prohibit further negotiation of the instrument

a person who does not qualify as HDC (holder in due course) but who derives his or her title through an HDC can acquire the rights and privileges of an HDC

contains the signature of the indorser and identifies the person to whom the indorser intends to make the instrument payable--that is, it names the indorsee (ex. "Pay to the Order of ______________, (signed) Paul Smith"

"agency indorsements" indorsements to persons who are to hold or use the funds for the benefit of the indorser or a third party