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Acceptor Liability Acceptance is a process whereby the acceptor (usually the drawee bank) signs a draft and thereby becomes primarily bound to pay the instrument
Accommodation Parites Liable on the isntrument in the capacity at which she sings even where the taker is aware of the accommodation. An accommodation party is never lialbe to the party accommodated
Fradulent Indorsements by Employees If an employer entrusts an employee with responsibility with respect to an instrument and the employee makes a fraudulent indorsement on the instrument, the indorsement is effective
Failure to Exercise Ordinary Care (Negligence) a person whose failure to exercise ordinary care substantially contributes to an lateration of forged signature on an instru. is precluded from asserting the alteration or forgery against a person who in good faith pd the instrum or took for value
Bank Statement Rule After receiving a statment, thes customer must promptly ue reasonable care in examining it for 2 things: an unauthorized signing of own name; and any alteration. If fails to reprolt she is precluded from complaining to bank
Estoppel By Certification if the bank certifies the check, it is therefore estopped as against subsequent parties from cliaming that the named payee was not the original payee.
Effect of Alteration and Incomplete Instruments An alteration is an unauthorized change in an instru. that purports to modify the obligation of any party in any respect. The effect depends on whether the alterer's intent was fraudulent or non-fraudulent
NonFradulent Alteration do not discharge any party, and the instrument may be enforced according to original terms
Fraudulent Alteration has the effect of discharging every party obligated on the instru. unless the party assents to or is precluded from asserting the alteration. Limitations-A payor bank or drawee paying a fraudently altered instrument, may enforce the instur
Presentment Warranties on Unaccepted drafts a drawee can recover for breach of the presentment warranties: -entitled to enforce -instru not altered -no knowledge that Drawers Sig is unauth
Statutory Discharge -Payment -Tender of Payment -Cancellation or renunication -Impariment of right of recourse/of collateral -Reacquisition of instr by prior party -fraudulent alteration -Cert of Ck -Acceptance varying a draft -unexcused delay in pres/notice of disho
Discharge by Payment party is discharged to the extent of her pymt or satisfaction to a person entiteld to enforce the instr even if pymt is made with knowledge of a cliam to another person unless prior to pymt the person making the claim: supplies indemnity or enjoins pymt
Discharge by Tender of Payment if pymt of an obligation is tendered to a person entitled to enforce, the effect of tender is governed by simple contract law
Discharge by Cacellation or Renunciation Person entitled to enforce an istru may, enven without consid., discahrge a party: 1)by an intentional voluntary act; or 2)by agreeing in signed writing not to sue
Discharge by Impairment of Recourse or Collateral-Suretyshpi Defenses A discharge of an obligated party does not discharge obligation of an indorser who has right of recourse against 3rd party. Any extention of time due discharges indorser Impairment-discharged
What Constitutes Impairment? 1. there is a failure to perfect a SI or otherwise file 2. the collateral is release w/out obtaining substitute collateral 3. there is failure to do any act req'd by agmt or law to reserve collat 4. there is failure to dispose of collateral as law req'
Discharge By Reacquisition a reacquisition occurs if an istru is tranferred to a former holder. The reacquirer may cancel idorsements that were made btwn the time she formelry held the instru and presnent. Has effect of discharging the indorsers whose sign. were canceled.
Discharge by any act that will discharge simple contract a party is discharged from his liability to anotehr party on an instru by any act of or agrmt with that party that would discharge an obligation to pay money under simple contract.
Discharge by Delay in Presenment of Check Indorsers= if a check not presented within 30 dyas, indorser discharged Drawers-no presnted within 20 days after its date, drawer deprived of funds, drawer id discharged
Discharge by failure to give Notice of Discharge if a notice of dishonor is req'd & notice is not given, the indorser is discharged form his indorsement obligations
Discharge by Acceptance of a Draft By a bank Indorsers=if a draft is accepted by bank after indorsement made, indorser is discharged Drawers= if draft is accepted, the drawer is discharged regardless of whne oby who acceptance was obtained.
Created by: sachav3