Nego Midterms Flashcards

Section 1.
Form of
negotiable instruments
An instrument to be negotiable must conform to the following
requirements:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain

in money;
(c) Must be payable on demand, or at a fixed or determinable future

time;
(d) Must be payable to order or to bearer; and

(e) Where the instrument is addressed to a drawee, he must be named
or otherwise indicated therein with reasonable certainty.
Sec. 23. Forged
signature; effect of
When a signature is forged or made without the
authority of the person whose signature it purports to
be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to
enforce payment thereof against any party thereto,
can be acquired through or under such signature,
unless the party against whom it is sought to enforce
such right is precluded from setting up the forgery or
want of authority.
Sec. 52. What
constitutes a holder in
due course.
A holder in due course is a holder who has taken the instrument under
the following conditions:
(a) That it is complete and regular upon its face;
(b) That he became the holder of it before it was overdue, and without
notice that it has been previously dishonored, if such was the fact;
(c) That he took it in good faith and for value;
(d) That at the time it was negotiated to him, he had no notice of any
infirmity in the instrument or defect in the title of the person
negotiating it.
Sec. 60. Liability of
maker
The maker of a negotiable
instrument, by making it, engages
that he will pay it according to its
tenor, and admits the existence of
the payee and his then capacity to
indorse.
drawer
The drawer by drawing the instrument admits the
existence of the payee and his then capacity to
indorse; and engages that, on due presentment, the
instrument will be accepted or paid, or both,
according to its tenor, and that if it be dishonored
and the necessary proceedings on dishonor be duly
taken, he will pay the amount thereof to the holder or
to any subsequent indorser who may be compelled to
pay it. But the drawer may insert in the instrument an
express stipulation negativing or limiting his own
liability to the holder.
acceptor
The acceptor, by accepting the instrument, engages
that he will pay it according to the tenor of his
acceptance; and admits:
(a) The existence of the drawer, the genuineness of

his signature, and his capacity and authority to draw
the instrument; and
(b) The existence of the payee and his then capacity

to indorse.
Sec. 65. Warranty;
where negotiation by
delivery and so forth
Every person negotiating an instrument by delivery or by a qualified indorsement,
warrants:
(a) That the instrument is genuine and in all respects what it purports to be;
(b) That he has a good title to it;
(c) That all prior parties had capacity to contract;
(d) That he has no knowledge of any fact which would impair the validity of the
instrument or render it valueless.
But when the negotiation is by delivery only, the warranty extends in favor of no
holder other than the immediate transferee.
The provisions of subdivision (c) of this section do not apply to persons negotiating
public or corporation securities, other than bills and notes.
general indorser.
Every indorser who indorses without qualification, warrants, to all
subsequent holders in due course:
(a) The matters and things mentioned in subdivisions (a), (b), and (c) of
the next preceding section; and
(b) That the instrument is, at the time of his indorsement, valid and
subsisting;
And, in addition, he engages that, on due presentment, it shall be

accepted or paid, or both, as the case may be, according to its tenor,
and that if it be dishonored and the necessary proceedings on dishonor
be duly taken, he will pay the amount thereof to the holder, or to any
subsequent indorser who may be compelled to pay it.
Sec. 184. Promissory
note, defined
A negotiable promissory note, within the meaning of
this Act, is an unconditional promise in writing made
by one person to another, signed by the maker,
engaging to pay on demand, or at a fixed or
determinable future time, a sum certain in money to
order or to bearer. Where a note is drawn to the
maker’s own order, it is not complete until indorsed
by him.
Sec. 185. Check,
defined
A check is a bill of exchange drawn on a
bank payable on demand. Except as herein
otherwise provided, the provisions of this
Act applicable to a bill of exchange
payable on demand apply to a check.
Sec. 191. Definition and
meaning of terms
In this Act, unless the context otherwise requires:
“Acceptance” means an acceptance completed by delivery or notification;
“Action” includes counterclaim and set-off;
“Bank” includes any person or association of persons carrying on the business of banking,
whether incorporated or not;
“Bearer” means the person in possession of a bill or note which is payable to bearer;
“Bill” means bill of exchange, and “note” means negotiable promissory note;
“Delivery” means transfer of possession, actual or constructive, from one person to
another;
“Holder” means the payee or indorsee of a bill or note who is in possession of it, or the
bearer thereof;
“Indorsement” means an indorsement completed by delivery;
“Instrument” means negotiable instrument;
“Issue” means the first delivery of the instrument, complete in form, to a person who takes
it as a holder;
“Person” includes a body of persons, whether incorporated or not;
“Value” means valuable consideration;
“Written” includes printed, and “writing” includes print.

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Section 1.

(b) Must contain an unconditional promise or order to pay a sum certain

(c) Must be payable on demand, or at a fixed or determinable future

(d) Must be payable to order or to bearer; and

(c) That he took it in good faith and for value;

(a) The existence of the drawer, the genuineness of

(b) The existence of the payee and his then capacity

(b) That he has a good title to it;

(c) That all prior parties had capacity to contract;

And, in addition, he engages that, on due presentment, it shall be

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