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Payment Systems (Liability of the Parties (on the instrument)…
Payment Systems
Liability of the Parties (on the instrument)
Maker (to pay according to the terms)
Indorser (pay according to the terms AFTER presentment and notice of dishonor)
"without recourse" eliminates obligations as a secondary party
Surety/accommodation party (additional rights to force other parties to pay/reimburse
May be intentional (I guarantee collection) - holder must first pursue maker or acceptor or show pursuit would be useless
May be an anomalous indorsement (an indorsement that seems out of place)
Drawer (promises to pay following presentment and notice of dishonor)
Drawee/Acceptor (no liability, unless signed)
Negotiability (form of the paper)
Payable on demand or at a definite time
Without additional promises
Recitation of consideration is not an additional promise
Imposition of a precondition to payment is an additional promise
Payable to bearer (anyone who bears it) or order (a named person) when it is issued or comes in possession of a holder
Unconditional promise (I will) or order (I direct you) to pay a fixed amount of money
Negotiation (moving through commerce)
Transfer: Delivery
for purpose of
giving the recipient the right to enforce
Negotiation a transfer that
creates rights
in a holder
Issuance (delivery to the first holder
Defenses
HDC (or one who takes shelter from a prior HDC) is subject only to real defenses
Illegality
Duress
Infancy or other incapacity to contract
Fraud in the factum (thought he was signing something else)
discharge in insolvency
alteration or forgery of the instrument
suretyship
Holder: subject to personal defenses
simple contract defenses
personal to the defendant, except theft of the instrument
fraud in the inducement (tricked into making a bad deal)
Warranty liability
Presentment
entitled to enforce (all instruments)
no knowledge that drawer's signature is unauthorized (drafts only)
no alteration (drafts only)
Transfer
No knowledge of insolvency procedurees
No defenses are good against the transferor
entitled to enforce
Signatures are authorized & authentic
No alterations
Holder in due course ("super" status)
A holder to whom a transfer of bearer paper OR properly endorsed order paper was made
for value
Without notice that it was
has been dishonored
is subject to a claim or defense
overdue
in good faith (honesty in fact and in compliance with reasonable commercial standards)