Business Law Chapter 26

Pola wants to transfer a check to Quin. The check is defective if it

has been previously dishonored.

Yves negotiates an instrument to Zachary. Negotiation is the transfer of an instrument

in a form and by a means that makes the transferee a holder.

Demi possesses a check that is "payable to bearer." Esther steals the check and delivers it to Fern. All rights to the check are

Fern's.

Lexy obtains a check payable to her order from Maven. To negotiate this order instrument to Nicole requires

Lexy's indorsement and delivery.

Edie is the payee of a bearer instrument—a promissory note in the amount of $1,000. Frank offers to irrigate Edie's ranch next week in ex-change for the note. Edie agrees and delivers the note to Frank. Frank is

NOT an HDC, because he did not YET GIVEN VALUE for the instrument.

Mike receives a payroll check from National Computer Systems, Inc., and indorses it by signing his name on the back of the check. This is

a BLANK indorsement.

Fact Pattern 25-1B. Belle obtains a check payable to her order from Charmayne. Belle signs the back and adds the notation "without recourse." Belle's signature and the notation "without recourse" constitute

a QUALIFIED indorsement.

Dora receives a check from Eagle Corporation. Dora indorses the check to First National Bank by writing "pay to First Nat'l Bank only" and signing her name. This is

a RESTRICTIVE indorsement.

Gina writes and signs a check payable to "Happy Market." Ira, Happy's manager, indorses the check "For deposit only." This is

a RESTRICTIVE indorsement.

Todd indorses a check, "Pay to Interstate Trucking if they deliver the lumber by May 1, 2012." This is

a RESTRICTIVE indorsement.

Fact Pattern 25-A1. Rollo obtains a check payable to his order from Simone. Rollo signs the back and gives the check to Trey. Trey writes "Pay to Trey" above Rollo's signature. When Trey writes "Pay to Trey" above Rollo's signature, Rollo's signature becomes

a SPECIAL indorsement.

Fact Pattern 25-1B. Belle obtains a check payable to her order from Charmayne. Belle signs the back and adds the notation "without recourse." After Belle signs the back and adds the notation "without recourse," she adds "Pay to Desiree." This constitutes

a SPECIAL qualified indorsement.

Petra signs a check payable to Quincy, who indorses the back, gives it to Regional Credit Union, and receives cash. The transfer of the check from Quincy to the credit union is

a negotiation.

Lauren transfers an instrument to Miguel in a form and by a means that makes Miguel a "holder." This is

negotiation.

Vladimir negotiates a bearer instrument to Wendy by

delivery.

To pay for investment advice from financial consultants Smith and Jones, Tony signs a check payable to "Smith or Jones." A proper in-dorsement of the check is

"Smith" only, OR "Jones" only, OR "Smith" and "Jones."

Finest Office Company employs General Construction, Inc. (GCI), to renovate an office and signs a note for $10,000 payable to GCI. GCI breaches the contract, but sells the note for $5,000 to Happy Collection Agency, which knows that GCI has not performed. Happy is an HDC of the note in the amount of

$0.

Dru signs a check payable to Excel Services, Inc., and gives it to Excel, leaving the amount blank but authorizing Excel to fill it in for $1,000. Excel fills in $1,500 and negotiates the check to Friendly Credit Corporation, an HDC. Friendly Credit can enforce the check for

$1,000.

Reel CGI Animé Company issues a promissory note as a demand instrument with a due date of October 5. Syncopated Loan Company accepts the note. Syncopated has notice that the note is overdue if the firm takes the note

AFTER October 5.

Jen makes a gift of a check to Kilroy who takes it in good faith and without notice of any claim, defense, or defect. With respect to this check, Kilroy is

AN ORDINARY HOLDER.

Kris transfers a note, on which Liu is the maker, to Mia, who takes it for value and in good faith. Mia knows that Kris breached the contract underlying the note, giving Liu a defense against payment. With respect to this note, Mia is

AN ORDINARY HOLDER.

Fact Pattern 25-A1. Rollo obtains a check payable to his order from Simone. Rollo signs the back and gives the check to Trey. Trey writes "Pay to Trey" above Rollo's signature. By writing "Pay to Trey" above Rollo's signature, Trey

AVOIDS THE RISK OF LOSS from theft of the instrument.

Bob receives a check from Chris. Without Bob's knowledge, Dan indorses it in his own name and deposits it in his account at Elm City Bank. In Bob's subsequent suit against the bank for the money, the court will most likely rule in favor of

BOB, because DAN'S SIGNATURE is not authorized.

Fact Pattern 25-1B. Belle obtains a check payable to her order from Charmayne. Belle signs the back and adds the notation "without recourse." By writing "without recourse" with her signature, Belle

RELIEVES HERSELF from liability on the instrument.

Parkdale Roofing Company receives a check from Quik Mart for fixing its roof, and indorses the check to Repair Supplies, Inc. (RSI). Stef, RSI's owner, gives the check to Tiny as a gift. In this situation, the party who is not an HDC of the check but who acquires HDC rights under the shelter principle is

Tiny.

Jill, in good faith and for value, gets from Kit a check "payable to the order of bearer." Jill does not know that Kit stole the check. Jill is

an HDC.

Fact Pattern 25-1B. Belle obtains a check payable to her order from Charmayne. Belle signs the back and adds the notation "without recourse." When Belle signs the back and adds the notation "without recourse," the check becomes

an ORDER instrument.

Fact Pattern 25-A1. Rollo obtains a check payable to his order from Simone. Rollo signs the back and gives the check to Trey. Trey writes "Pay to Trey" above Rollo's signature. When Trey writes "Pay to Trey" above Rollo's signature, the check becomes

an ORDER instrument.

Rayette transfers a draft by signing it and delivering it to Suki. Suki is

an indorsee.

Velma transfers a note by signing it and delivering it to Woz. Woz is

an indorsee.

Tiffany transfers a draft by signing it and delivering it to Uma. Tiffany is

an indorser.

Tyrone transfers a note by signing it and delivering it to Uri. Tyrone is

an indorser.

Ivy signs a check payable to Jon and gives it to him. Jon indorses the back, and transfers the check to Ked. To negotiate the check to Luis, Ked must

deliver the check to Luis.

Ollie negotiates an order instrument to Phil by

delivery with any necessary indorsement.

Clem gets a $100 check as a gift from Daria. Clem crudely increases the amount of the check to $1,00—the alteration is obvious—and transfers it to eReady Sets, Inc., in exchange for a 3D HD TV. eReady deposits the check in its bank account at First Town Bank. HDCs of this check include

none of these parties.

Blythe, an accountant for Credits & Debits, acquires a negotiable instrument from Eton by promising to pay its face value in thirty days. Blythe acquires the status of an HDC when she

pays the face value due on the instrument.

Florencia, who is not a GigaBank customer, attempts to cash a check drawn on the bank. The check is considered dishonored if GigaBank

refuses to pay it.

Fact Pattern 25-1B. Belle obtains a check payable to her order from Charmayne. Belle signs the back and adds the notation "without recourse." After Belle signs the back and adds the notation "without recourse," further negotiation of the check

requires DELIVERY ALONE.

Fact Pattern 25-A1. Rollo obtains a check payable to his order from Simone. Rollo signs the back and gives the check to Trey. Trey writes "Pay to Trey" above Rollo's signature. After Trey writes "Pay to Trey" above Rollo's signature, further negotiation of the check

requires TREY'S indorsement and delivery.

Owen is a holder of a promissory note obtained from Purchase Money, Inc. Regarding the defenses against payment of the note to which Purchase Money is subject, Owen, as an ordinary holder, is subject to

the SAME defenses.