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       #Post#: 68--------------------------------------------------
       Commerical paper outline [Kent -Spak]
       By: Penny22 Date: February 17, 2011, 10:11 pm
       ---------------------------------------------------------
       Commercial Paper Outline
       Prof. Spak
       DEFINITIONS:
       Parties to Draft -  Drawer/Drawee/Payee/Indorsers
       Parties to Note - Maker (co-makers)/Payee/Indorsers
       1. The Concept of Negotiability §3-101 - §3-115
       1. Requisites of §3-104
       1. Negotiable instrument means an: (UPFPD)
       1. Unconditional- (Express conditions destroy negotiability)
       2. Promise or order
       3. to pay a fixed amount of money, with or without interest
       1. specified amount
       2. foreign money is negotiable. §3-107.
       3. Wood carvings, gold and commodities are not.
       4. Putting $1000 or 5000 F is not negotiable, because they
       may not equal each other.
       5. US doesn’t recognize Cuban money
       4. payable to bearer or to order at the time it is issues or
       first comes into possession of holder
       5. payable on demand or at a definite time §3-108
       1. demand
       6. no date (silence) - neg.
       7. blank  (_______) - neg.
       8. at sight/will - neg.
       1. definite time
       9. date - neg. (when put date, changes from demand to time
       paper)
       10. “30 days after sight or will” - neg.
       11. future definite date - neg.
       12. past definite date - non-neg.
       13. “30 days after ’97 World Series” - non-neg., don’t know
       date of World Series.
       14. “30 days after ’96 World Series” - non-neg., conditional
       on the occurrence of an event.
       15. Installment note - neg. (payable at definite times)
       16. Acceleration clause - neg.  (all due now if payment not
       made)(on Dec. 31 or sale of house, whichever happens
       first)(2/2/99 or death)
       17. Extension clause (“maker may extend this note”) -
       non-neg., it’s an illusory promise which can be extended
       forever.
       18. “Extended to 9/2/98” - neg. because at definite date.
       19. “On death” - non-neg. (no demand or time)
       1. Miscellaneous provisions
       20. “non-negotiable” put on instrument - can opt out of
       negotiability.  You can’t opt in by putting “this is
       negotiable.”
       21. must say “pay to the ORDER of,” NOT “pay TO.”
       22. handwriting controls print
       23. words control figures
       24. “I promise to pay to the order of ____ or bearer” - neg.
       bearer paper (no need for signature).
       25. “Pay to the order of ____” - bearer
       26. “Payable to A Can of Sardines/A Roach” - neg. bearer paper
       because if you don’t intend to make it payable to a person, it’s
       bearer.
       27. “Payable to Peter, Paul & Mary” - all 3 must indorse.
       28. “Payable to Peter, Paul OR Mary” - only 1 must indorse.
       29. “Payable to Peter, Paul, and/or Mary” - treated like “or”
       - 1 indorsement.
       30. §3-111 - place of payment
       31. §3-113 - an instrument can be antedated or postdated; if
       undated, use date of issue.
       1. Must have: SIGNATURE (X is OK) and IN WRITING (paper not
       required).
       1. LIABILITY VIS-A-VIS NOTES/DRAFT
       1. Maker
       1. Obligation §412 - primary
       2. Defenses - Maker takes free of personal defenses (must pay
       on real defenses - SOL, forgery, fraud)
       1. Indorser
       1. Obligation §415 - secondary
       2. Defenses - without recourse = not liable.
       1. Drawer (Check Writer)
       1. Obligation §414 - secondary
       2. Defenses - free of personal defenses, not real.
       1. Drawee (Bank)
       1. Obligation - primary
       1. Acceptor (Bank)
       1. Obligation §413 - primary, which discharges the liability
       of the drawer.
       1. SOL -
       3 years
       32. Draft (unaccepted) - 3 years after dishonor; 10 years
       after date of draft (whichever expires first)
       33. Action to enforce obligation of acceptor of certified
       check or issuer of teller’s check, cashier’s check or traveler’s
       check - 3 years after demand made to acceptor/issuer.
       34. Obligation to pay CD - 3 years after demand.
       35. Action for conversion, breach of warranty, enforcing duty
       - 3 years
       6 years
       36. Note, payable demand or definite time
       37. Action to enforce obligation to pay accepted draft - 6
       years.
       1. CONDITIONS PRECEDENT (for indorser to pay)
       1. Presentment §3-501
       1. holder or payee presents instrument
       2. to maker in note,
       3. to the drawee (bank) in a draft,
       4. obligation of indorser - §3-415(e) - if an indorser of a
       check is liable and check is not presented for payment or given
       to bank for collection w/in 30 days after the day the
       indorsement was made, the liability of indorser is completely
       and totally discharged.
       5. obligation of drawer - §3-414(f) - drawer is discharged
       pro tanto, to the extent that he suffered a loss because of the
       delay.
       1. Dishonor §3-502
       2. Notice of Dishonor §3-503
       1. timely notice
       1. bank - midnight the next day.
       2. non-bank (Jewel) - 30 days from notice of dishonor.
       1. indorser/drawer - notice must be given to them because
       obligations may not be enforced unless notice given; if notice
       not given, their liability discharged.  See G.d. and G.e.
       1. AGENCY LAW
       1. Principal authorizes the agent to act on his behalf.
       Agent s not liable because he is acting solely on behalf of the
       principal.
       2. Must determine who is bound: principal or agent
       3. Principal can’t delegate 4 things to agent:
       1. writing will
       2. proxy marriage (authorize someone to get married for you)
       3. voting for another person
       4. signing up for the army
       1. §3-401 - Signature - person (principal) is not liable on
       an instrument unless he has signed the instrument, or the person
       (principal) is represented by an agent or representative who
       signed the instrument and the signature is binding on the
       representative under §402.
       1. §3-402 - Signature by Representative -
       1. principal bound if agent signs principal’s name;
       2. principal bound if agent signs his own name without
       identifying principal;
       3. agent will not be bound if 2 things written:
       1. who is represented
       2. representative capacity exists
       1. agent is not liable if signature is authorized by
       principal or represented person
       1. §3-403 - Unauthorized Signature -
       1. ratified - agent signs it and afterward principal says OK.
       2. unauthorized - if more than one signature required to be
       an authorized signature, and one is lacking, it is unauthorized.
       
       1. Hypotheticals -
       1. “Mike Spak, agent” - principal bound; agent bound because
       although it shows rep. capacity, doesn’t show person who is
       being represented.
       2. “Steve Burrows, Mike Spak”; “Steve Burrows, Inc. Mike
       Spak” - principal bound; agent bound because although shows who
       is represented, doesn’t show rep. capacity.
       3. “Steve Burrows, Inc., by Mike Spak, Treasurer” - Burrows,
       has shielded himself of personal liability by incorporating;
       does not apply to lawyers and doctors who try to incorporate
       (P.C.).
       4. “Steve Burrows, Inc., Mike Spak” - if a check, the agent
       is not bound because it’s a corporate check which has the
       principal’s name on it so you know the agent will sign it
       because a corporation has to act through agents.
       1. HDC Rule in Agency Law
       1. If HDC takes in good faith and the instrument does not
       identify the principal, the agent is bound to the HDC.
       2. If the facts tell you that the principal authorized it,
       then the code says to follow contract law.  ????????
       
       1. INDORSEMENTS §3-204  See handout #2
       1. 4 Elements to an Indorsement:
       1. Special or Blank §3-204
       1. special - specifying indorsee (to whom payable)
       2. blank - only an indorsement, no indication to whom payable
       1. Restrictive or Non-restrictive §3-206
       1. prohibiting further negotiation (limiting payment to a
       particular person - “pay X only”).
       2. conditional (pay X if he delivers my car) 
       conditions on indorsement don’t destroy negotiability.
       3. “For deposit or collection”
       4. trust restrictive  - instrument bears an indorsement using
       words that payment is to be made to indorsee as agent or
       trustee.
       1. Qualified or Unqualified §3-415
       1. qualified - without recourse (negates K liability, not
       warranty)
       2. unqualified - no “without recourse”
       1. Anomalous or Non-anomalous §3-205
       1. anomalous - an indorser who is not a holder (out of chain)
       - Front says: “I promise to pay to the order of A.”  Back: “Pay
       B, signed A.”  “Pay C, signed B.”  “Pay Hezekia Lipshitz.”  “Pay
       D, signed C.”  (Hezekia is our anomaly).  The only effect of an
       anomalous indorser is to make the signer liable as an indorser
       (normally, made by accommodation parties).
       2. non-anomalous - a holder of an instrument, in the chain of
       indorsements.
       1. TRANSFER WARRANTIES §3-416
       1. 5 Warranties of Transfer -
       38. When (payee) transferring an instrument (to drawee bank),
       the transferor warrants that (Take Some Advil, Dean Irene):
       1. Title - warrantor has title and is entitled to enforce the
       instrument
       2. Signatures are genuine
       3. No Alteration
       4. No Defenses - instrument is not subject to a defense or
       claim in recoupment
       5. No Knowledge of Insolvency
       1. When does the transferor assert the 5 warranties of
       transfer (In Tuhey’s Pants):
       1. Issuance
       2. Transfer (difference between issuance and transfer?)
       3. Presentment - the only possible  is maker or
       drawee.  Transferor warrants to maker or drawee (TAK):
       1. title - warrantor is a person entitled to enforce the
       draft;
       2. alteration - the draft has not been altered;
       3. knowledge - the warrantor has no knowledge that the
       signature of the drawer of draft is unauthorized.
       1. Who makes the warranties of transfer:  a person who
       transfers for consideration (payee/holder???).
       1. Signature is not necessary for warranty liability.  (If V
       is payee and transfers check to B, but does not sign because it
       is bearer paper, V is still liable for the transfer warranties).
       
       2. For consideration/value - yes.
       3. To whom does the transferor make the warranty of title: if
       by indorsement, then they warrant to all subsequent holders; if
       no indorsement, only warrant to immediate transferee.
       4. Can the transferor disclaim the transfer warranties: the
       warranties cannot be disclaimed with respect to checks
       (warrantor can disclaim the warranties when it comes to notes).
       
       5. Can the warrantor receive damages? Yes, but not over face
       value.  See Chart #1.
       6. There are no conditions precedent to Warranty Liability.
       7. What happens if breached? ASK SPAK.
       1. Example: If Spak takes forged promissory note from Kent
       and Spak sells to Bruce, and indorses “pay Bruce, without
       recourse,” Bruce can still sue Spak because without recourse
       does not relieve Spak of liability under warranty.
       2. Example: Bruce issues this instrument: “I promise to pay
       to the order of OWL DRUGE, $400,000, signed Bruce.”  Bruce
       doesn’t have money to pay.  He indorses the notes to his family
       - “pay family, without recourse, OWL.”  Family says they will
       pay him $400,000.  OWL refuses to give up the notes.  OWL says
       notes are stolen. OWL feared warranty liability to subsequent
       holders.  Does OWL have liability under K? No legitimate fear
       under §3-415.  Does OWL have liability under warranty?  NO, he
       made all warranties of transfer under §3-416.
       1. CONTRACT LIABILITY
       1. 4 people under K liability (make indorser’s dicker ache):
       1. maker - primary
       2. indorser - secondary
       3. drawer - secondary
       4. acceptor (drawee) - primary
       1. When is the transferor liable under K law?  §3-302 - HDC
       Rule : when he takes it for value.
       1. Who makes K liability? MIDA.
       2. Is signature necessary for K liability?  Yes.
       3. Do you need consideration/value between maker and
       indorser?  No, because there is no K between these parties.
       (When Sr. signs for Jr. as indorser, Sr. isn’t getting
       consideration, just love and affection).
       4. To whom does the transferor have K liability to? If by
       indorsement, extends to all subsequent holders; if not, only to
       the immediate transferee.
       5. Can the transferor disclaim K liability? Yes, if he says
       without recourse.
       6. Can the transferor receive damages?  Yes, but not over
       face value.  See Chart #1.
       7. Are there conditions precedent to K liability?  Yes.
       §3-415(a) - if an instrument is dishonored, an indorser is
       obliged to pay the amount due on the instrument; (b) if an
       indorsement states that it is made without recourse or otherwise
       disclaims liability of the indorser, indorser is not liable
       under (a) to pay the instrument.
       8. What happens if breached?
       1. SURETYSHIP - one who undertakes to pay $$ or perform other
       acts in the event that his principal fails to do so; the surety
       is directly and immediately liable for the debt (Charlie Sr. and
       Jr. - purchase of car)
       1. See Handout #3.
       2. You can’t tell agency by looking at instrument, you need
       facts.
       3. Cast of characters: debtor, creditor, surety.
       4. Any time there is an anomalous signature, there is a
       surety.
       5. Distinguish between:
       1. Surety (strict) - primary obligation (accommodation maker
       signs on front of note; as soon as debt is due, must pay; signed
       as maker = maker)
       2. Guarantor - secondary obligation; demand and default; pay
       if debtor won’t pay (dad signs on back).
       3. Guarantor of Collectibility - has to pay after demand,
       default, and lawsuit.  Must write “guarantor of collectibility.”
       1. Statute of Frauds - generic suretyship requires writing.
       In MYLEGS, the S is Suretyship.
       39. Main Purpose Rule - “where the main purpose of the
       surety’s promise is to benefit himself, not the debtor, then
       it’s enforceable as oral.”  Example: a promise from a surety
       saying that he’ll backstop the contractor’s debt because he
       wants his building built is orally enforceable because the main
       purpose of the promise was to benefit himself.
       1. Creation of Suretyship:
       1. By Contract -
       1. Minor enters K, dad must sign name to the instrument.  If
       get car concurrently w/ both of them signing the instrument, the
       consideration is the same for dad and son.
       2. Minor signs without dad, dad is not bound by the
       instrument if non-negotiable; bound if negotiable.  Salesman
       can’t sell note to HDC because not concurrent signatures.
       3. Aetna - if lose neg. instrument, a surety company will pay
       the loss.
       1. By Operation of Law (constructive suretyship) - when a
       third person contracts w/ debtor to pay the debt and there is no
       substitution of a new party for an old one, then the debtor
       becomes the surety.  Example: Spak is buying house and asks bank
       if someone else can pay back his loan.  By operation of law,
       Spak, the original debtor, becomes the surety (and gets the
       rights of a surety).
       
       1. Rights of Sureties:
       1. Against Creditor -
       1. notice - surety has no right to notice.
       2. right to compel collection - can surety tell creditor to
       collect from debtor first?  [In IL, Yes by statute because give
       right to compel collection from surety even though no right by
       K.]  Depends on type of surety:
       1. Collectibility guarantor - no
       2. Guarantor - yes
       3. Strict surety - yes
       1. application of security held - no right to application of
       security held against creditor.  Exception in IL under equity:
       if the right is so important to surety because debtor is
       insolvent, we’ll give him this right.
       1. application of funds - surety does not have right to apply
       his funds to a particular debt he is paying off (creditor will
       always say it was the totally unsecured debt that debtor was
       paying off)
       1. Against Debtor - debtor ought to pay.
       1. exoneration - suit to compel payment; surety can sue
       debtor for payment.
       2. subrogation - derived right, triggered only by complete
       satisfaction of the surety of the debt.
       3. indemnification (reimbursement) - surety’s right to get
       any payment that he makes back.
       1. Against Co-Sureties - 100% contractual (K between them)
       1. exoneration - suit to compel payment from the other
       co-sureties, for fair share.
       2. subrogation - one company can satisfy the entire debt by
       stepping in the shoes of the creditor.
       3. contribution - when one co-surety pays more than his fair
       share, he has the right to get anything more than his fair share
       back.
       1. Defenses of Surety
       1. Debtor’s Defenses:
       1. YES
       1. vitiation of debt
       2. creditor = crook
       1. NO
       1. infancy
       2. insanity
       3. bankruptcy
       40. These are the whole reason why suretyship was created
        to back these people up.
       2. Variation of Risk - surety does not have right to notice, but
       if suffer loss, then surety can recover from the maker.
       1. Modification of K
       2. Extension of time  - see Handout #4, #2.  §3-605(c): the
       extension discharges an indorser or accommodation party having a
       right of recourse against the party whose obligation is extended
       to the extent the indorser or accommodation party proves that
       the extension caused loss to the indorser with respect to the
       right of recourse.
       3. Release of co-surety
       4. Release of Security - debtor is holding 100,000 shares of
       stock: “give me some security back so that I can sell it and
       have more working capital.”
       1. Surety’s Defenses -
       41. Surety can use all debtor’s defenses.
       42. See Handout #4
       2. §3-419 Instruments for Accommodation
       1. Accommodated party benefits; the accommodation party
       incurs liability without being a direct beneficiary (max maker
       is the accommodation party - he is primarily liable as a direct
       surety even though his only consideration was love; if signs as
       indorser, he is secondarily liable)
       2. The accommodation party is liable in the capacity in which
       he signed (maker/drawer/acceptor/indorser).
       3. person who signs accommodates
       4. accommodated party, as surety, is obliged to pay only if :
       1. judgment against debtor unsatisfied
       2. debtor is insolvent
       3. debtor can’t be served w/ process
       4. payment can’t be obtained from debtor
       1. an accommodation party is entitled to reimbursement from
       the debtor.  Example: See Handout #4.  Spak wants to sell neg.
       instrument he got from Kent.  Ben said he’d buy it, only if
       Levin signs as an indorser surety.  Kent didn’t pay so Ben goes
       to Levin.  Usually, an prior indorser has to reimburse a later
       indorser.  However, since Spak is the debtor and Levin is the
       surety, Spak cannot recover from Levin, but if the HDC makes
       Levin pay, Levin can recover from Spak.
       1. §3-116 - Joint and Several Liability
       43. 2 or more persons who have the same liability are jointly
       and severally liable in the capacity in which they sign.
       44. 2 or more anomalies are jointly and severally liable as
       co-sureties.  2 makers are jointly and severally liable as
       co-sureties.
       1. Constructive Sureties -
       45. Handout #4, #5 - Conviser and Collens are co-sureties;
       widow of Conviser can recover against Collens when Conviser dies
        he’s a constructive surety.
       1. NEGOTIATIONS
       1. Negotiation v. Transfer §3-203: Negotiation is a specific
       type of transfer.  Transfer is a generic giving of an
       instrument.  If non-negotiable, use regular K law, not Article
       3, the HDC Rule.  If negotiable, use HDC rule.
       2. Negotiation §201: Transfer of an instrument by negotiation
       makes the person who receives it a holder.
       1. Order paper (special indorsement) negotiation =
       proper indorsement + delivery.
       2. Bearer paper (blank indorsement)  negotiation =
       delivery alone.
       3. Order can convert to bearer and vice versa.
       1. Anomalous indorsements are irrelevant to negotiation.
       1. Handout #5, #1, 2, 3 -
       1. “Pay HDC, Spak (f)” - forgery.  Will HDC be able to
       recover from C-K, the maker?  No, there is not proper
       indorsement (because the real person didn’t sign it) so you
       don’t even go the HDC rule because the HDC isn’t a holder.
       Although the instrument is negotiable, it wasn’t negotiated
       (indorsement and delivery required and indorsement not proper).
       2. This is bearer paper so delivery alone is required and
       sufficient for negotiation.
       3. Last Indorsement Rule - (1) Spak  Levin, (2) Levin
        payee, (3) payee  Collens, (4) Collens 
       Steinperson without indorsement), (5) Steinperson  Me
       (without indorsement).  Am I a holder?  NO, Steinperson is not a
       holder because Collens didn’t indorse (broke the chain) and was
       supposed to indorse it because it was order paper.  Since
       Steinperson isn’t a holder, then I’m not a holder.
       
       1. HOLDER IN DUE COURSE RULE §3-302
       1. Holder took the instrument:
       1. for value
       2. in good faith - the test is BOTH:
       46. subjective standard -  honesty in fact (if you believe it
       was a good check) AND
       47. objective standard - observance of reasonable commercial
       standards (if a reasonable prudent person believes it)
       3. without notice
       1. Irregularity - says “paid”; “null and void”; all crumpled
       up.
       2. Overdue
       3. Claims
       1. Defenses
       48. Warnings/Red Lights §3-302(c) - Not a HDC if:
       1. Bulk Sale - go to Field’s and say you want to buy all of
       it  you’re owner of the checks payable to Field’s but
       not a HDC.
       2. Judicial Sale - police take check out of a criminal’s
       pocket and it goes on judicial sale.  Someone who buys the check
       is the owner of the check, but not a HDC.
       3. Estate - Insufficient cash to bury Louie so sell of his
       notes.  Someone who buys these notes is the owner of the notes,
       but not a HDC.
       1. FORGERY AND ALTERATION §3-302(a)(1) - “the instrument,
       when issued or negotiated to the holder does not bear such
       apparent evidence of forgery or alteration or is not otherwise
       so irregular or incomplete as to call into question its
       authenticity.”  (If forged or altered, no HDC).
       49. “I promise to pay to the order of Smith $1000, signed
       Spak.”  He changed his mind and made it payable to Jones, and
       put his initials on it.  Someone who gets this instrument is a
       holder, not an HDC because there’s evidence of an alteration.
       (What is the test here?  Subjective and Objective - what if he
       didn’t realize there was an alteration?)
       50. “60 days after the above date, I promise to pay to the
       order of Smith $1000, signed Spak.” The date on check was
       1/4/76.  Spak changed 76 to 77.  This is NOT evidence of forgery
       or alteration - dates are not recognized as alterations so Smith
       is still an HDC.
       1. Handout #6 -
       1. Incomplete Date payee is not HDC.
       2. Payee name blank  bearer.
       3. No Drawee specified  non-negotiable instrument;
       payee not HDC.
       4. No “Pay to the ORDER of”  non-negotiable note
       because words of negotiability not present; (§3-104(c) = words
       of negotiability not needed for a check?????)
       5. Stamped “PAID”   this is an irregularity so
       non-negotiable - no HDC.
       6. Missing “I”  does not affect HDC, still
       negotiable.
       7. No interest rate  write in the market/judgment
       rate (constructive rate - §3-112) - still an HDC.
       8. Missing numbers  not incomplete as to authenticity
       because words prevail over figures and the words are there.
       Payee is still HDC.
       9. “NULL and VOID”  Irregularity destroys
       negotiability - no HDC.
       1. §3-302 (a)(2)(iii):  without notice that the instrument is
       1. overdue
       2. has been dishonored.
       1. Forgotten Notice Doctrine §1-201(25): A person has notice
       of a fact when:
       1. he has actual knowledge of it
       2. he received notification of it
       3. from all the facts and circumstances known to him, at the
       time in question, he has reason to know that it exists.
       (Responsible for things you don’t know, but should know).
       2. Ex.  Fazarri, an illiterate man, was swindled into signing
       a tax form, which was really a check.  He goes to the bank and
       tells bank not to honor it.  Bank says OK.  Bank then pays
       crook.  Is Bank HDC? They took it for value, good faith, but
       without notice (originally did have notice but forgot).  Bank is
       not HDC, but Court says they are because under the Forgotten
       Notice Doctrine.  Just because Bank got notice doesn’t mean they
       can’t be an HDC—because they may have forgotten that they got
       notice.
       1. or there is an uncured default with respect to payment of
       another instrument issued as part of the same series. Ex.
       Series Notes (1 of 12, 2 of 12, etc.).  If you knew no payment
       was made on the first 4, and you got 5 of 12, you can not be an
       HDC because you took the instrument and there’s an uncured
       default.
       1. PARTIAL HDC’S. Can you be a partial HDC? Yes.
       3. §3-302(d): If the promise of performance that is the
       consideration for an instrument has been partially performed,
       the holder may assert rights as an HDC of the instrument only to
       the fraction of the amount payable under the instrument equal to
       the value of the partial performance divided by the value of the
       promised performance.
       4. Ex.  Spak is the Holder of $100 Note, signed by Conviser.
       Spak says he’ll sell it to Neil for $50. Afterwards, Neil say
       he’ll pay $25 now and $25 tomorrow.    Neil goes to get $ from
       Conviser today and Conviser says Spak is a thief.  Conviser will
       have to pay $50.  Neil is a proportional HDC because he only
       gave 50% of the agreed deal.
       5. However, if Spak sold him a $100 Note for $50, then Neil
       would still be a full HDC, and Conviser would have to pay the
       full $100.
       6. Bank uses FIFO (first in, first out) when X goes to bank
       to deposit check.  If check bounces, bank reverses the entry.
       Bank gives provisional entry and won’t let customer draw on
       unclear items.
       7. §3-302(f) To be effective, notice must be received at a
       time and in a manner that gives a reasonable opportunity to act
       on it.  If you are giving  notice to bank, give them time to
       receive the info.
       8. §3-302(g) This section is subject to any law limiting
       status as an HDC in particular classes of transactions, such as
       consumer sales and home sales.
       1. Value and Consideration
       1.   Gifts
       Ex.  I promise to pay to the order of Spak
       $1000            Conviser.
       1. Spak indorses it to P.J. and signs without recourse. Spak
       gives P.J. the instrument as a gift.  P.J. goes to Conviser for
       $. Conviser doesn’t pay and P.J. won’t get $ from Conviser
       because P.J. is not an HDC since she did not give value for the
       instrument (no consideration).  P.J. can’t sue Spak because it
       is an incomplete gift and Spak received no consideration.
       2. Regular K law applies: Conviser can use off-set defense.
       1. §3-303 Value and Consideration
       1. Value if:
       1. Instrument is issued or transferred for a promise of a
       performance, to the extent that the promise has been performed;
       2. Transferee acquires a security interest or other lien in
       the instrument other than a lien obtained by judicial
       proceeding; (ex. Mortgage)
       3. the instrument is issued or transferred as payment of, or
       as security for, an antecedent claim (prior debt) against any
       person, whether or not the claim is due;
       4. the instrument is issued or transferred in exchange for a
       negotiable instrument; or
       5. the instrument is issued or transferred in exchange for
       the incurring of an irrevocable obligation to a 3rd party by the
       person taking the instrument
       9. Executed performance: Something you did. (1,2,3)
       10. Executory performance: Something you have not done yet.
       (4,5)
       11. If bearer paper is lost, the finder is never an HDC
       because the value element is missing.
       1. Consideration means any consideration sufficient to
       support a simple K .  The drawer or maker of an instrument has a
       defense if the instrument is issued without consideration.  If
       an instrument is issued for a promise of performance, the issuer
       has a defense to the extent performance of the promise is due
       and the promise has not been performed.  If an instrument is
       issued for value as stated in (a), the instrument is also issued
       for consideration.
       12. Ex.  Conviser gives Spak an instrument as a retainer for
       representation on Spak case.   Is Spak an HDC?  Conviser’s
       promise to be on retainer was executory, so it’s consideration
       but NOT value.  Therefore, Spak is not an HDC.
       13. Definition of Retainer: 1) Client’s trust fund—fee given
       advance , 2) Lawyer’s money---not an advance, a fee earned as
       soon as it’s given. Money given for promise to represent.
       1. §3-304 Overdue Instrument
       1. An instrument payable on demand becomes overdue at the
       earliest of the following times:
       1. on the day after the day demand for payment is duly made;
       2. if the instrument is a check, 90 days after its date; or
       3. if the instrument is not a check, when the instrument has
       been outstanding for a period of time after its date which is
       unreasonably long under the circumstances of the particular case
       in light of the nature of the instrument and usage of the trade.
       1. With respect to an instrument payable at a definite time
       the following rules apply:
       1. If the principal is payable in installments and a due date
       has not been accelerated, the instrument becomes overdue upon
       default under the instrument for nonpayment of an installment,
       and the instrument remains overdue until the default is cured.
       2. If the principal is not payable in installments and the
       due date has not been accelerated, the instruments becomes
       overdue on the day after the due date;
       3. If a due date with respect to principal has been
       accelerated, the instrument becomes overdue on the day after the
       accelerated due date.
       Ex. Installment note, secured by mortgage
       I Promise to pay to the order of SPAK
       $20,000 on 1/2/3/4/5
       1. secured by mortgage
       2. acceleration clause            Kent, Inc.
       By Collins, Pres.
       51. secured by mortgage - doesn’t destroy neg.
       52. provides for acceleration clause - doesn’t destroy neg.
       53. FACTS: Spak’s a crook and talked Collins into making bad
       investment.  Collins pays w/ this instrument, which total would
       be $500,000, for the $1M that Spak would give him for the
       instrument.
       54. Indorsement A: “Pay HDC, Spak.”  “Pay Conviser, HDC.” Can
       Spak enforce note? NO because he’s a crook.  HDC endorses to
       Convisor.  Convisor took it w/ no value, in bad faith, knew of
       overdue claims/defenses, so he is not an HDC.  However, because
       of the Shelter doctrine, Conviser can make Kent pay.  Shelter
       Doctrine, §3-203, gives one who receives an instrument from an
       HDC, the same rights as an HDC (sheltered by 1st HDC).  If one
       conveys, even as gift, one has HDC status.    The HDC rule is
       expanded by Shelter Doctrine.
       55. Indorsement B: “Pay HDC, Spak.”  “Pay Spak, HDC.”  If Spak
       buys the instrument back from the HDC, Spak can’t get rights
       under the Shelter Doctrine because he is a crook (crooks falls
       under an exception to the shelter doctrine).
       I Promise to Pay to the Order of M.F
       $1000
       Currency Exchange
       
       
       56. Facts: MF supposed to deliver table and didn’t.  MF sued
       Currency Exchange.  Currency Exchange did give the negotiable
       instrument to M.F.  MF loses because its is not a negotiable
       instrument because there wasn’t delivery.  For order paper,
       there MUST be proper indorsement and delivery.  Is it possible
       for a payee to be an HDC?  Yes.  The comment to §3-302 said
       payee couldn’t be HDC because the neg. instrument wasn’t
       negotiated to payee, it was just transferred to payee.  Present
       code does not have that line in it  you CAN be a HDC as
       payee only in 4 fact patterns: (1) remitter, (2) co-maker, (3)
       fraudulent crediting, (4) agency.
       1. DEFENSES
       I promise to pay to order of PAYEE (thief)
       $1000                    Maker (w/ defense)
       57. Facts: Payee negotiates to Chris (HDC).  Chris goes to
       Maker for $$.  Maker claims he was swindled.  It was supposed to
       be gold and it was shit (fraud  maker has to pay).
       Someone signed his name on the instrument (forgery 
       maker does NOT have to pay).
       §3-305: (a) right to enforce instrument is subject to following
       defenses:
       1. real defenses (HDC loses on these)(11 of these) - a
       defense of the obligor based on
       1. infancy - ex.: 17 year old signs note; lack of capacity;
       HDC loses if K for non-necessity.  If for necessity (food), HDC
       wins (gets money).  If infant is emancipated by marriage or
       army, the HDC wins (gets money).
       2. duress - if someone puts gun to maker’s head, HDC will not
       get his money because duress is a real defense.  This applies to
       the person or someone he owes a legal duty to (like wife).  The
       K is VOID.  If someone puts a gun to maker’s head and threatens
       to tell that he is a pothead, the K is VOIDABLE (not a nullity;
       personal defense).   Lack of capacity - if someone says that he
       is waiting for martians, the K is VOIDABLE - personal defense;
       HDC wins.  Illegality - HDC goes to maker and makes says he
       won’t pay because he’s a corp. and not licensed to do business
       in that state.  This is a real defense and illegality renders
       the K a nullity.
       3. fraud in execution (factum) - HDC loses (real defense).
       Whereas, fraud in the inducement is a personal defense and HDC
       wins.
       1. I purchase gold watch.  Salesman says it’s real but it
       isn’t.  Personal defense fraud because he knew he was buying a
       watch but just didn’t buy a gold one.
       2. famous baseball player signs autograph.  Someone puts
       “I’ll pay you $1M over it.” Player has real defense because
       didn’t know.
       3. you buy diamond.  It’s not the real thing.  Personal
       defense.
       4. Mike comes to house to do siding.  Tells customer he’ll
       give them free siding.  Mike changes the document to a security
       deposit agreement - Real defense.
       5. estoppel = real defense.  (1) Guy can’t speak or read
       english and signs a note.  Wife, who’s w/ him does speak
       english.  He is negligent if doesn’t ask her to read the K. (2)
       99% of fraud is personal.  Only 2 types of fraud are real:
       switch documents and autograph.
       1. discharge of the obligor in insolvency proceedings.
       1. personal defenses (HDC wins on these)(over 100)
       1. right of an HDC to enforce the obligation of a party to
       pay the instrument is subject to 11 real defenses of the obligor
       in (a)(1) and the person who have the HDC can use these defenses
       against him (HDC will not get paid) but not subject to personal
       defenses of obligor in (a)(2).
       
       58. Surety as a Defense Example:
       I promise to pay to the order of Laura Fletcher
       $25000 secured by mortgage on building
       Spak
       Witness By:    X (Conviser)
       Smith
       Jones
       14. Smith and Jones are not indorsers they are simply
       witnesses for Conviser.  Conviser is an accomodation party to
       Spak.
       15. Facts: Spak wants to borrow $ from Laura only if Conviser
       co-signs and secures it with the mortgage.  Spak goes bankrupt.
       Will Conviser have to pay Laura if Spak doesn’t? NO.  He is a
       surety (variation of risk).  Suretyship is a real defense if
       person knew he was a surety.  Surety defense has to be known.
       59. Federal Trade Commission Rule Elements.  In a limited
       amount of cases, HDC is abolished.  Congress delegates authority
       to FTC.  HDC is diminished by the FTC.  Elements for abolishment
       of HDC defense:
       1. human being (not corp)(can be an alien)
       2. buys consumer goods/services (for family use - food and
       knife for kitchen; knife in deli = equipment; knife in ACE =
       inventory)
       3. on credit (not check, therefore no HDC)
       4. then no HDC rule, any defense can be used.
       F         Fed. Trade Commission (Title 16) - maker not pay HDC
       Fraud in the Factum (a)(1)
       Forgery (3-401)
       A        Alteration (3-407)
       Adjudication Insanity (a)(1) - Incapacity - nullity K
       I        Infancy (a)(1)
       Illegality (a)(1)
       D        Discharge of Insolvency (a)(1)
       Duress (a)(1)
       S        SOL (3-118)
       Suretyship (3-605)
       60. Forgery - §3-401
       61. If maker’s name forged, would he have to pay the HDC?  NO.
       Forgery is a real defense.  It’s totally ineffective as of the
       name “MAX MAKER” but totally effective as of the forger’s name
       “FREDDY FORGER.”  B/c it’s a perfectly valid instrument as to
       “FF”, warranty of title is not breached.
       62. Alteration - §3-407
       63. Sam changes a note written by Max Maker for $1000 to
       $10,000.  This is a real defense to the extent of the alteration
       so Max has to still pay the $1000, but not the extra $9000.  If
       maker is negligent in drafting the instrument, he will have to
       pay full $10,000.
       64. Drafting in pencil - not negligent.
       65. Leaving check book out - not negligent.
       66. Leaving amount blank or leaving signature stamper out -
       negligent.
       67. HDC with respect to Drafts: HDC Rule is just as applicable
       to drafts as notes.  If Sam is a crook and gives instrument to
       payee and payee goes to drawer to receive money, HDC has same
       obligations/defenses.
       68. Enforcement of Lost, Destroyed or Stolen Instruments -
       §3-309
       69. Example: grandma loses a stock certificate or SS check.
       They can get a new instrument.  But the issuer will want a bond
       for it so that if the true owner comes they can get money back.
       The cost of the bond depends on the risk.  §3-309 says
       reasonable security must be furnished instead of the bond.
       Types of security:
       1. cashier’s check: bank is drawer and drawee;
       2. certified check: your check w/ a certified stamp;
       3. teller check: 2 different banks on it, but like cashier’s
       ck.
       70. these are backed by the bank; bank’s credit is on the line
       - treated like cash.
       1. Checks and Drafts: Drawer-Drawee
       
       To: Drawee National Bank                    October 30, 1997
       Pay to the order of Spak
       $1000 (one thousand)
       Cecilio Franco ()
       A. DRAWER-DRAWEE RELATIONSHIP
       71. relationship between drawer and drawee = K
       72. drawer puts money in bank; drawee pays out properly
       payable items.
       1. if drawee doesn’t pay but should have, that’s wrongful
       dishonor (§4-402) and drawee is liable for breach.  Ex.: if
       balance in a/c is $3000, draws check for $1000.  Bank bounces it
       (wrongfully dishonors).  The drawer can collect all damages
       proximately caused (provable).  If drawer can show wilful
       dishonor, drawer can get punitive damages.   However, a bank may
       dishonor an item that would create an overdraft unless it has
       agreed to pay the overdraft.
       2. if drawee does pay and shouldn’t have, that’s a breach.
       Ex.: check that says “if he delivers my car in a satisfactory
       condition tomorrow.”  This is a conditional instrument that is
       not a negotiable instrument.    §4-103 says that parties can
       agree to whatever they want.  If bank and drawer say there can
       be conditions, the conditions will stand (under K law) but they
       can’t be too gross or violate good faith.  Not negotiable though
       and bank won’t agree to this type of condition anyway.
       3. Write a check for $1000 and balance is $500.  If bank pays
       it, the bank wins.  §4-401 (a) - “bank may charge against the
       a/c of a customer an item that is properly payable from the a/c
       even though the charge creates an overdraft.”
       4. Post-dated check - The date on the check is 3/20/98 and
       bank pays it.  §4-401(c) - “even though payment was made before
       the date of the check, the check is valid.”  The bank can honor
       it early.  Technically, this a post-dated check is no longer a
       check but a time draft.
       5. Stop payment order -§4-403:  you tell bank to not pay the
       check because you were swindled.  You may do it orally (not in
       TX).  If bank still pays on it, bank is liable.  You must renew
       your stop order after 6 months.  If bank has a provision saying
       they will try best to not makes mistakes but they miss a stop
       payment order  anyway, this is not okay because the bank can’t
       waive the effects of a stop payment order.
       6. Death - §4-405 - “neither death nor incompetence of a
       customer revokes the authority to accept, pay, collect, or
       account until the bank knows of the fact of death or of an
       adjudication of incompetence and has reasonable opportunity to
       act on it.”  Bank can pay after date of death for 10 days, even
       if it has notice of the customer’s death.  Bank will prevail.
       Ordinarily, with agency, death ends everything.
       7. Antedated Check - §4-404 - The date on the check is
       3/20/96.  “Bank is under no obligation to a customer having a
       checking a/c to pay a check other than a certified one, which is
       presented more than 6 months after its date, but it may charge
       its customer’s a/c for a payment made thereafter in good faith.”
       Bank doesn’t have to pay on stale checks but can charge a/c if
       does.
       8. Bundle case - $3000 in a/c.  7 checks come into drawer’s
       account: (1) 1500,  (2) 1000, (3) 1000, (4) 500, (5) 500, (6)
       499, (7) 1.  Can bank bounce them all?  No.  Bank must use one
       method - usually pays its items first and then pays off the
       biggest one.
       73. Problem of Timing: there must be a time at which the bank
       can no longer have effective notice (like a stop payment order).
       When:
       1. the bank irrevocably commits the money.
       2. bank sets artificial cut-off at 2 pm; everything after 2pm
       is too late.
       3. too late if paid in cash.
       16. after these 3 things, they are no longer bound by notice.
       1. NEGLIGENCE IN THE DEALING
       Example 1
       To: Drawee (D)
       Pay to the order of MF
       $1000                            Russell ()
       74. Indorsement: “MF” (forged in ink).  “Spak” (pencil)
       75. Facts: Russell looking to employ someone.  Spak applies.
       Spak’s a crook.  Spak’s job is to prepare checks for Russell’s
       signature.  He pads the checks (25 legit, he makes 2 extra).
       Russell signs all to MF.  Spak cashes the checks.  Crime
       discovered.  When checks come back, Spak erases his name because
       in pencil.
       76. The drawer-drawee relationship is K.
       77. Russell’s argument: not properly payable because supposed
       to be to MF.
       78. Bank’s argument: Drawer Negligence (negligence in
       dealing).  Drawer suffers the loss because he was negligent in
       hiring.
       §3-404(b) - Fictitious Payee Rule - “if a person whose intent
       (I) determines to whom an instrument is payable or doesn’t
       intend the person identified as payee to have any interest in
       the instrument, or (ii) the person identified as payee of an
       instrument is a fictitious person, the following rules apply
       until the instrument is negotiated by special indorsement:
       1. any person in possession of the instrument is its holder;
       2. an indorsement by any person in the name of the payee is
       effective as the indorsement of the payee, in favor of a person
       who in good faith, pays the instrument or takes it for value or
       for collection.
       79. Spak’s “intent” to forge was never intended to benefit MF,
       it was intended to benefit Spak.
       80. Indorsement by anyone is effective.  If effective, Russell
       (drawer) suffers the loss.  Law says indorsement is not a
       forgery.
       Example 2
       To Drawee (D)
       Pay to the order of Mr. & Mrs. J
       $25,000                    Terrence ()
       81. Indorsement: “Mr. J” (forged).  “Mrs. J.”
       82. Facts: Mr. J on business trip.  Mrs. J brings in hottie
       lover.  She says it’s a good time to sell house. Puts sign up
       for sale.  Lover boy forges and indorses Mr. J’s name.  Terrence
       buys house, by writing a check to drawee, payable to the couple.
       Mr. J comes home.  Who owns the house now?  Mr. J still does,
       the deed was forged.
       83. Bank’s argument: indorsement valid under Imposter Rule
       §3-404(a) - “if an imposter, by use of mail or otherwise,
       induces the issuer of an instrument to issue the instrument to
       the imposter or a person acting in concert w/ imposter by
       impersonating the payee of the instrument or a person authorized
       to act for the payee, an indorsement of the instrument by any
       person in the name of the payee is effective as the indorsement
       of the payee in favor of a person who in good faith pays the
       instrument or takes it for value or for collection.”
       84. Terry’s argument: this is a forgery - “I made the check
       payable to the real Mr. and Mrs. J.”
       85. Code shifts loss from drawee to drawer because of his
       negligence in the dealing w/ an imposter.
       Example 3
       To: Drawee (D)
       Pay to the order of MF
       $1000                            Russell ()
       86. Indorsement: “Fields.”
       87. Facts: Spak is a MF employee.  Same person who receives
       the check shouldn’t be the same person to credit the a/c.  Theft
       would be too easy.  Spak given every job in one.  He sets up a/c
       under account Mike Fields.  Gets fake ID.  When new money comes
       in, Spak credits yesterday’s account, etc. etc.  Then he skips
       town.  In some cases, the payee will suffer, not drawer. Spak
       had authority to indorse Field’s name (Mike Field) but had no
       authority to deposit it in his own a/c.
       §3-405 - Employer’s Responsibility for Fraudulent Indorsement by
       Employee
       1. Employee
       2. Fraudulent Inducement
       3. Responsibility - controller negligence; drawer negligence
       - bad accounting technique by MF giving Spak every job.  Loss
       could have been avoided if the duties were split up.
       1. DRAWER NEGLIGENCE IN THE DRAFTING
       Example 1
       Pay ____________
       $ ________                    Terrence
       88. Facts: puts this check in locked drawer in office.  Thief
       steals checks and improperly fills them out and cashes them.
       Check comes through.  Terrence knows it’s a genuine signature,
       but someone (Spak) stole it.  Where you leave out name of
       payee/amount, can you get a jury instruction that says whoever
       was more negligent should suffer the loss?  No.  Jury will put
       the loss on bank because it has more money.  Bank will always
       lose against the underdog in this type of example.
       89. §3-406 - Negligence Contributing to Forged Signature or
       Alteration of Instrument - where you’re negligent in the
       drafting (blank spaces in checks/not having the squiggly line
       after amount/giving someone to fill in right amount), you’re
       precluded from asserting this defense - drawer suffers.  Terry
       left it in a box so he’s precluded from using the defense.  Not
       negligence to draft check in pencil OR to leave blank checkbook
       (w/ unsigned checks) on top of counter, knowingly frequented by
       thieves.
       Example 2
       To: Drawee (D)
       Pay to the order of Spak
       $1000
       Russell ()
       90. Indorsement: “Pay HDC, Spak.”
       91. Facts: Russell stops payment on check because he was
       defrauded.  Spak can’t sue Russell for K breach.  If signed to
       HDC, could he force Spak to pay Russell?  HDC takes free of all
       defenses - he can make Russell pay.
       Example 3
       92. Same check as #2.
       93. Facts: Russell issued stop payment order.  If bank pays
       HDC over stop payment, Russell can’t make bank put it back
       because of shelter rule - Russell can’t have the bank get back
       what they paid the HDC because the bank bought the instrument,
       so it has the rights of an HDC.  Can Russ have bank pay him back
       for paying over a stop payment order?  Yes, because they
       shouldn’t have paid.  Bank loses if pay someone not an HDC.
       1. DRAWER NEGLIGENCE IN NOTIFYING
       Example 2
       To Drawee (D)
       Pay to the order of Mr. & Mrs. J
       $25,000                    Terrence ()
       94. Facts: Spak forges Terry’s name.  Spak takes it and cashes
       it at Jewel.  If Jewel knew of the forgery, they wouldn’t cash
       it.  They did cash it though because they knew Spak.  Would the
       drawee bank pay if knew signature forged?  No.  If the bank does
       pay, the real Terry gets checks back.  If he finds this check he
       didn’t sign, he calls the bank to make a stop payment.  Bank
       must put it back in his a/c because it’s a forgery.  If Terry
       notifies the bank 15 years later, bank doesn’t have to put the
       money back because it’s negligence in the notifying.
       Example 3
       95. Facts: thief steals check from mailbox and indorses Spak’s
       name.  Bank will pay it because they don’t know your
       indorsement.  You won’t find out until Spak calls you.  Can Spak
       still get money from Terry if stolen in mail if payable to Spak?
       Yes, he’s entitled to the money.  Bank must put the money back
       in a/c, but Terry must notify immediately.
       96. SOL -
       1. one year to notify bank for forged drawer.
       2. three years for forged indorsement.
       3. article II - K for goods is 4 years.
       4. 30 days (from time you get check or list of checks) to
       notify the bank for multiple forgeries by same wrongdoer.
       1. HOLDER-DRAWER RELATIONSHIP
       Example 1
       I promise to pay to the order of SPAK
       $1000                    Cathy Higgins
       97. Indorsement: “Pay HDC, Spak.”
       98. Facts: Spak gives Cathy a car for $1000.  Nature of
       Cathy’s (maker) promise is to pay.
       99. §3-412: Obligation of issuer of note or check - “issuer of
       a note or check is obliged to pay the instrument according to
       its terms at the time it was issued, or if not issued, at the
       time it first came into possession of a holder.”  Spak could sue
       Cathy on her promise to pay as could the HDC.
       100. §3-415: Obligation of indorser - liability of an indorser
       is secondary (if I get conditions precedent, I’ll pay).
       Conditions precedent that make indorser pay:
       1. presentment - §3-501
       2. dishonor - §3-502 (if maker doesn’t pay)
       3. notice of dishonor - §3-503 (must notify payee)
       Example 2
       To Drawee, Kenosha Bank
       Pay to the order of Spak
       $1000                    Cathy Higgins (buyer of goods)
       101. Facts: Cathy gives Spak this check.  Cathy has her bank in
       Kenosha and Spak’s bank is in Chicago.  But, he mails the check
       to Kenosha because he’s cheap and doesn’t want to spend 10 cents
       for out of state checks.  If Spak deposits it in Chicago Bank,
       it would have taken one day for check to get to Kenosha.  But
       since he sent it to Kenosha, it took five days and the money
       wasn’t there because it didn’t get there in time. She had money
       in her a/c the day after she wrote it, but because it got there
       5 days late, she paid other checks and there wasn’t enough money
       for that check.
       17. Spak’s arg: Drawer (Cathy) is secondarily liable and has
       to pay.
       18. Cathy’s arg: Spak cause an unreasonable delay of
       presentment.
       19. Under the CODE, Spak wins because the proper time frame
       for presentment is 30 days.
       102. Indorsement: “Pay Bank, Spak.”
       103. Spak deposits it in his bank (depositary bank).
       104. Liability of Drawer and Indorser = secondary (condition
       must happen 1st)
       105. Liability of Drawee = primary (unconditional promise to
       pay)
       106. W/o Recourse = negates K liability, but not necessarily
       warranty liability.
       107. If there’s a delay in conditions precedent, the effect is
       a total discharge of liability to indorser, but not to drawer
       (drawer has pro tanto liability - can show that could have had
       $$ if would have presented it).
       Example 3
       To:  Drawee (Chicago)
       Pay to the order of             Stephanie
       $1000                    Spak
       20. Facts: Spak gives check to Stephanie and Stephanie goes to
       Bank in Chicago to cash the check at 10 a.m.  At 10:30 a.m., the
       bank was folding and finally folded at 2p.m.  Everyone who
       stayed at the bank got paid.  Stephanie did not stay, she went
       to lunch.
       21. Steph’s arg: She had no obligation to stay, the bank had
       liability.
       22. Spak’s arg: Spak should not pay because Stephanie should
       have waited.
       23. CODE says: Spak loses.  Timely Conditional Precedent of 30
       days.
       Example 4
       To: Drawee of FRANCE
       Pay to the order of                 Joe (payee)
       100,000 F.                      Drawer Bank
       24. Facts: Joe moves to France and asks for check from bank
       with his entire a/c.  When he gets to France there is a war and
       Joe decides to go back to U.S. Before he goes, he mails the
       check back home and asks his brother Sam to return money to Bank
       in Chicago.  Bank stalls and eventually says NO.
       25. Joe (Payee) v. Bank (Drawer)
       26. Bank’s arg: Liability of Drawer is secondary.  Pays if he
       gets conditions precedent in a timely manner and presentment did
       not occur because nobody went to Drawee of France.
       27. Joe arg: Waiver of conditions precedent, unless the
       condition occurs or is excused.  Joe says they are excused.
       28. In the case, Joe wins because conditions precedents were
       waived.
       29. UCC:  §3-504 Excused Presentment and Notice of Dishonor
       1. Presentment
       1. Can’t find with reasonable diligence.
       2. Maker or Acceptor is dead or insolvent or has refused to
       pay
       3. By terms of instrument itself, it’s waived (it is not
       necessary to enforce obligations of indorsers or drawers)
       4. Drawer or Indorser has waived presentment (come back
       tomorrow)
       5. Drawer accepted Drawee not to pay or accept
       1. Notice of Dishonor: Can be given by
       1. By terms of instrument itself, it’s waived or excused
       2. The party whose obligation is being enforced waived notice
       of dishonor (waiver of presentment is also waiver of dishonor)
       1. Delay in giving notice of Dishonor is excused temporarily
       if it is beyond the control of the person giving notice and the
       person giving notice exercised reasonable diligence after the
       cause of the delay ceased.  (a big storm).
       Example 5
       To:  Bank of NY
       pay to the order of             Jennifer
       $1000                    Spak
       30. Facts: Spak writes check to Jennifer but the bank of NY is
       not in U.S.  A formal notice of dishonor (PROTEST) works only
       for drafts outside of U.S.  Spak’s liability is secondary.
       31. §3-505 - Protest is optional.
       Example 6
       To: Drawee
       pay to the order of             Jennifer
       $1000                    Spak
       32. Indorsement on back: “Pay Depository,  Jennifer.”
       33. Facts: Jennifer is a crook.  If she sues Spak, she’ll
       lose.  Is it possible that a depository bank is an HDC? YES.
       How? Depository Bank 99% of the time won’t give value, but here
       they did give her value—so they are an HDC. Bank and Payee can
       be HDCs but it’s rare.
       1. Holder - Drawee Relationship
       Example 1 -
       To:  First National Bank () (party A)
       pay to the order of                Brian () (party C)
       $10,000&nbs
       #Post#: 83--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: Acezenoevo Date: April 21, 2015, 4:34 am
       ---------------------------------------------------------
       Read, listen and think on it.
       #Post#: 98--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: toystoryful Date: May 25, 2015, 11:11 pm
       ---------------------------------------------------------
       Whether women or men have studied it. Because this is really
       useful.
       #Post#: 104--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: kakanew Date: January 20, 2016, 2:11 am
       ---------------------------------------------------------
       Obligation §413 - primary, which discharges the liability of the
       drawer.
       #Post#: 106--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: Ballsomsak Date: March 8, 2017, 10:46 pm
       ---------------------------------------------------------
       This is very good content. I read a good knowledge that is very
       useful.
       #Post#: 113--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: Slimnut Date: December 28, 2017, 2:54 am
       ---------------------------------------------------------
       It's a very fun game. I like it so much. I hope you write the
       full story.
       #Post#: 120--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: Sebeya Date: April 25, 2018, 12:21 am
       ---------------------------------------------------------
       I still think like that. If anyone has a good answer, it is
       recommended.
       #Post#: 137--------------------------------------------------
       Re: Commerical paper outline [Kent -Spak]
       By: paovaree Date: November 6, 2018, 3:32 am
       ---------------------------------------------------------
       Thank you for this answer.
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