REG - 13

Question 1

Contract Liability: Primary Parties

Answer 1

Makers of Notes

Drawees of Drafts

Question 2

Contract Liability: Secondary

Answer 2

Drawers of Drafts

Endorsers

Question 3

Presenter’s Warranties

Answer 3

Implied promises:

• Good Title
• No knowledge signatures are unauthorized
• No material authorization

Question 4

Transferor’s Warranties

Answer 4

• Good title
• Signatures are genuine and authorized
• No material alteration
• No defenses (without recourse endorsement waives)
• No knowledge of insolvency

Question 5

Without Recourse

Answer 5

waives “no defenses” warranty only; not an elimination of liability

Question 6

HDC Defenses: Real/Universal (real)

Answer 6

• Incapacity
• Illegality
• Fraud in Factum
• Bankruptcy
• Lack of Payment
• Forgery (some exceptions)

Question 7

HDC Defenses: Personal “Whining” (not my problem)

Answer 7

• Fraud in the Inducement
• Misrepresentation
• Lack of consideration
• Original defense
• Warranty breach
• Breach of contract

HDC gets paid

Question 8

HDC Defenses: Mixed

Answer 8

• Duress

* Material alteration

Question 9

Material Alteration

Answer 9

terms changed such as amount, interest, or days; removal from instrument; adding to instrument; completion without authorization; no correction:

• HDC still collects according to original terms
• Non HDC collects nothing
• Negligence Issues

Question 10

Real Defenses

Answer 10

Those that can be asserted universally. That is, they may be asserted against any holder of a negotiable instrument.

Examples: material alteration, discharge in bankruptcy