Negotiable Instruments Law

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Questions and Answers

What happens when a HIDC transfers an instrument to a party not a HIDC?

The transferee loses all rights to the instrument

The transferee acquires the right to enforce the instrument as if he was a HIDC (correct)

The instrument becomes void

The transferee is responsible for any fraud or illegality affecting the instrument

What is not a real defense?

Illegal consideration

Minority

Lack of consideration (correct)

Forgery

What is a type of fraud that can be a defense against a negotiable instrument?

Fraud in factum

Fraud in inducement

Fraud in esse contractus

All of the above (correct)

What happens when there is non-delivery of a complete instrument?

It is a real defense Signup and view all the answers

What is presumed in every negotiable instrument?

That it was issued for a valuable consideration Signup and view all the answers

What is a type of defense that is only available to a minor?

Minority Signup and view all the answers

What is ultra vires in the context of negotiable instruments?

An act beyond the authority of a corporation Signup and view all the answers

Who is not considered a holder for value?

The transferee who received the instrument as a gift Signup and view all the answers

What is a mistake that can be a defense against a negotiable instrument?

Insertion of a wrong date Signup and view all the answers

What happens when value has been given for the instrument at any time?

The holder is deemed a holder for value to all parties Signup and view all the answers

What is the requirement for a holder in due course?

That the instrument was negotiated by a holder for value Signup and view all the answers

What is not a real defense in negotiable instruments?

Lack of consideration Signup and view all the answers

What happens when an instrument is negotiated to a new holder?

The new holder is subject to all defenses of the prior parties Signup and view all the answers

What is a characteristic of a negotiable instrument?

It must be negotiable and transferable Signup and view all the answers

What is an example of a holder for value?

A person who negotiated the instrument for a car Signup and view all the answers

What is NOT a characteristic of a negotiable instrument?

It must be used for a specific purpose Signup and view all the answers

What is the status of a holder who takes an overdue instrument?

Put on inquiry Signup and view all the answers

What destroys the holding in due course?

Notice of infirmity in the instrument or defect in the title of the prior party Signup and view all the answers

What is an example of infirmity in the instrument?

All of the above Signup and view all the answers

What is an example of defect in the title of a prior party?

All of the above Signup and view all the answers

What is presumed of a holder?

Good faith Signup and view all the answers

What happens when a holder gets information of any defect or infirmity in the instrument?

He is put to inquiry Signup and view all the answers

What is a crossed check?

A check with two parallel lines drawn across its face or across a corner thereof Signup and view all the answers

What should a holder do if an instrument is overdue when it is negotiated to him?

Question why the instrument is still in circulation Signup and view all the answers

Study Notes

Consideration

Every negotiable instrument is deemed to have been issued for valuable consideration.
Every person whose signature appears on the instrument is presumed to have become a party thereto for value.
In case of donation or gift, the transferee is not considered a holder for value.

Holders

A holder is deemed a holder for value in respect to all parties who become such prior to that time if value has been given for the instrument at any time.

Holder in Due Course

A holder in due course (HIDC) acquires the right to enforce the instrument as if he was a HIDC if he negotiates the instrument to a party not a HIDC.
This does not apply if the transferee is a party to any fraud or illegality affecting the instrument.

Real Defenses

Defenses available to all parties: forgery, lack of consideration, non-delivery of incomplete instrument, material alteration, ultra vires act of a corporation, fraud in factum or fraud in esse contractus, illegality, vicious force or violence, want of authority, prescription, discharge in insolvency, and mistake.

Personal Defenses

Defenses available only to the minority: minority.
Other personal defenses: failure or absence of consideration, illegal consideration, non-delivery of complete instrument, conditional delivery of complete instrument, fraud in inducement, filling up blank not within authority, duress or intimidation, filling up blank beyond reasonable time, transfer in breach of faith, and insertion of wrong date.

Overdue Instruments

A holder who takes an overdue instrument is put on inquiry, although he is not aware of any existing defense of a prior party.

Notice of Infirmity or Defect

Notice of infirmity in the instrument or defect in the title of the prior party will destroy the holding in due course.
Infirmity: any irregularity in the instrument, such as material alteration or forgery.
Defect: irregularity on the title of a prior party to the instrument because the prior party obtained the instrument by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances that amounts to fraud.

Good Faith

A holder is presumed to be in good faith, but once he or she gets information of any defect or infirmity in the instrument or of any circumstances where he or she would be put to inquiry.

Crossed Check

A crossed check is a check with two parallel lines drawn across its face or across a corner thereof.

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Description

A lecture on negotiable instruments law, covering topics such as consideration, holders, and holder in due course. This quiz is part of a law course.