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Business Law

Objectives. State the difference between holders and holders in due courseList the requirements for holder-in-due-course statusOutline the liability of parties who sign negotiable instruments. Objectives. Identify transfer warranties, which extend to both signers and nonsigners of negotiable instr

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Business Law

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    1. Business Law Chapter 24 Transferability and Liability

    2. Objectives State the difference between holders and holders in due course List the requirements for holder-in-due-course status Outline the liability of parties who sign negotiable instruments

    3. Objectives Identify transfer warranties, which extend to both signers and nonsigners of negotiable instruments List presentment warranties, which extend to both signers and nonsigners of negotiable instruments

    4. Holder vs. Holder in Due Course Holder Possesses a negotiable instrument Legally entitled to payment Has the status of an assignee of a contract right

    5. Holder vs. Holder in Due Course Holder in Due Course (HDC) Special-status transferee Meet acquisition requirements Takes the instrument free of most defenses and all claims to it

    6. Requirements for HDC Status Taking for Value Taking in Good Faith Taking without notice of defect

    7. Taking for Value HDC must have given value Promise is not value Five ways: Performing the promise Acquiring a security interest Taking instrument in payment of pre-existing debt Giving negotiable instrument as payment Giving an irrevocable commitment

    8. Taking in Good Faith Acquired the instrument honestly Good Faith – honesty in fact and the observance of reasonable commercial standards of fair dealing

    9. Taking Without Notice No HDC if aware, or should be aware, of defect Overdue Dishonor Uncured default Unauthorized signature or alteration Defense or claim Question of authenticity

    10. Taking Without Notice What Constitutes Notice? Actual knowledge Receipt of notice Reason to know Overdue Instruments Past due date Check – 90 days or less

    11. Signature Liability Primary Liability Absolutely required to pay, subject to certain defenses Unconditional, makers and acceptors Secondary Liability Drawers and indorsers Pay if: proper presentment, dishonored, and timely notice of dishonor

    12. Secondary Liability Proper Presentment To proper person, in proper manner, and timely Proper Notice Reasonable manner Bank – midnight of next banking day Other – within 30 days of notice to dishonor

    13. Signature Liability Unauthorized Signatures Exceptions: signature ratified or negligence Special Rules for Unauthorized Endorsements Imposters Fictitious Payees

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