Ch. 29 – Negotiable Instruments Flashcards
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a person in possession of a negotiable instrument that runs to her (legal def)
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holder
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a person in possession of a negotiable instrument that runs to her (legal def), what does that mean?
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is made out to her, payable to her order, endorsed to her, or order paper
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what is the significance of being a holder?
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makes one immune to certain lawsuits (gives defenses that an ordinary party to the transaction doesn't have -- special rights)
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what is transferred differently?
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order paper and bearer paper
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how is bearer paper (negotiated) transferred?
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transfer alone
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delivery of bearer paper can be what?
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actual or constructive
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does it matter if the transfer lawful, when referring to bearer paper? why or why not?
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no, because the transfer alone transfers title
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when a negotiable instrument is made out "to bearer" who has title?
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whoever hold paper holds title to paper and whatever it represents (ex: bearer bonds)
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a thief in the line of possession does not affect valid title, when referring to what type of negotiable instrument?
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bearer paper
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a thief in the line of possession does not affect title as long as what?
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the person receiving the paper acts in good faith (does not know that the documents have been stolen)
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bearer paper that is by transfer alone may or may not require an endorsement?
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it may (example: a paycheck that has been endorsed and then subsequently lost / check made out to cash, no sign required)
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to negotiate order paper requires what?
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an endorsement
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an indorsement that does not name the person to whom the paper, document of title, or investment security is negotiated
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blank indorsement
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what creates bearer paper form order paper [check was made payable to me (order paper) upon indorsement (creates bearer paper)]
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indorsing a check
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a check made out to me and I indorse it, is called what?
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blank indorsement
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consists of the signature of the indorsor and words specifying the person to whom the indorsor makes the instument payable (indorsee)
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special indorsement
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checks made out to me, write "Pay to So-and -So", then I indorse below
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special indorsement
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indorsement that qualifies the effect of a blank or a special indorsement by disclaiming certain liability of the indorsor to a maker or a drawee -- disclaimer is giving using the phrase "without recourse"
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qualified indorsement
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sign check "without recourse" then sign it: means what?
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qualified indorsement,
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what indorsemetn is used when we have someone who has no interest in the transaction
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qualified indorsement
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specifies the purpose or the use to be made of the instrument
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restrictive indorsement
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write "for deposit only", acct #98898, then indorse
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restrictive indorsement
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restrictive indorsments restrict what?
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what account the check can be deposited into
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only a _________ endorsement changes the character of CP?
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restrictive indorsement
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a ________ indorsement makes bearer paper, order paper or order paper, bearer paper
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blank indorsement
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that a forged or unauthorized indorsement is not a legal indorsement
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the general rule regarding order paper
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a forged or unauthorized indorsement is not a legal indorsement, why?
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because it is not going to be the indorsement of the person whose name is signed
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is a forged or unauthorized indorsement a valid indorsement?
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no
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is order paper negotiated? why or why not?
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no; because there is not a negotiation if the signature is forged or unauthorized
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if a bank pays a check that has a forged signature, who is liable?
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the bank is liable for payment to the rightful owner of that check
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once there is a forged signature on order paper what happens?
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it becomes a worthless document
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if order paper and there is a forged signature, can anyone ever be a holder?
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nope
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when a negotiable instrument is transferred by negotiation, the transferors give certain what?
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implied warranties
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implied warranties are regarding what?
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the nature of the instrument itself
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indorsements are made when?
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when a person signs a piece of CP and receives consideration
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(the first implied warranty that is made in reference to negotiation) --endorser is entitled to enforce the instrument, means what?
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that they are entitled to receive payment
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define the second implied warranty that is made in reference to negotiation:
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that the signatures are authentic and authorized
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define the third implied warranty that is made in reference to negotiation:
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that the instrument has not been altered
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define the fourth implied warranty that is made in reference to negotiation:
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that the instrument is not subject to a defense or claim by a 3rd party that can be asserted against the indorer
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define the fifth implied warranty that is made in reference to negotiation:
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the indorser has no knowledge of insolvency (bankruptcy) proceedings by the maker
