Holder in due course
- already a holder
- pay value (give, do, forgivev)
- take instrument in GF
- w/o notice of problems affecting obligor’s obligation to pay
Transfer warranties
- warrantor can enforce NI
- all signatures on NI are authentic & authorized
- NI hasn’t been altered
- no defenses/claims can be asserted against transferor
- no knowledge of insolvency
Presentment warranties
- W entitled to enforce NI (no unauthenticated/missing indorsements)
- draft not altered
- no knowledge of drawer’s signature being unauthorize
SOL for
Drafts
- 3 years from date of dishonor or 10 years from date of draft, whichever is earlier
- certified - if presenting, 3 years after demand for payment
Notes
- payable at defniite time - 6 years after due date
- on demand- 6 years after deman for payment
Real defenses`
- infancy (void and voidable)
- incapacity (void)
- duress (void)
- illegality (void)
- fraud - fraud in factum, fraud in inducement (personal defense only)
- bankruptcy
- alternation/forgery
- SOL
Negotiabilty
- in writing, signed by maker/drawer
- unconditional promise or order to pay
- fixed principal amount
- payable to order/bearer
- on demand or at definite time
- no additional conditions, undertakings, agreements
Shelter rule
Rights follow the instrument - Transferee gets whatever rights transferor had
Exception - transferee who gets instrument by fraud can’t be HDC (but if transferee doesn’t know and transfers to 3P who does know, 3P still gets transferee’s rights)
Types of indorsements
Special - transfer of to specific person
blank - not to specific person
qualified - limits liability on instrument (ex: “without recourse”)
restrictive - limit what holder can do w/ instrument (“for deposit only”, can’t be performance based etc.)
Notes - parties
Maker - promisor
Payee - promisee
Unauthorized signatures
- Imposters (drawer gets duped) - enforceable if indorsed by any person In payee’s name
- fictitious/unintended payees (good employees go bad) - Same as above, corp is liable as it was in best position to prevent
- employer’s liability for fraudulent employee - employer remains responsible
- benefited parties - people receiving unauthorized NIs, usually GF purchasers for value. Must use ordinary care in taking NI
Notes - parties
Drawer - person ordering payment
drawee - person being ordered to pay
Payee - person getting paid
