24 Questions
What happens when a HIDC transfers an instrument to a party not a HIDC?
The transferee acquires the right to enforce the instrument as if he was a HIDC
What is not a real defense?
Lack of consideration
What is a type of fraud that can be a defense against a negotiable instrument?
All of the above
What happens when there is non-delivery of a complete instrument?
It is a real defense
What is presumed in every negotiable instrument?
That it was issued for a valuable consideration
What is a type of defense that is only available to a minor?
Minority
What is ultra vires in the context of negotiable instruments?
An act beyond the authority of a corporation
Who is not considered a holder for value?
The transferee who received the instrument as a gift
What is a mistake that can be a defense against a negotiable instrument?
Insertion of a wrong date
What happens when value has been given for the instrument at any time?
The holder is deemed a holder for value to all parties
What is the requirement for a holder in due course?
That the instrument was negotiated by a holder for value
What is not a real defense in negotiable instruments?
Lack of consideration
What happens when an instrument is negotiated to a new holder?
The new holder is subject to all defenses of the prior parties
What is a characteristic of a negotiable instrument?
It must be negotiable and transferable
What is an example of a holder for value?
A person who negotiated the instrument for a car
What is NOT a characteristic of a negotiable instrument?
It must be used for a specific purpose
What is the status of a holder who takes an overdue instrument?
Put on inquiry
What destroys the holding in due course?
Notice of infirmity in the instrument or defect in the title of the prior party
What is an example of infirmity in the instrument?
All of the above
What is an example of defect in the title of a prior party?
All of the above
What is presumed of a holder?
Good faith
What happens when a holder gets information of any defect or infirmity in the instrument?
He is put to inquiry
What is a crossed check?
A check with two parallel lines drawn across its face or across a corner thereof
What should a holder do if an instrument is overdue when it is negotiated to him?
Question why the instrument is still in circulation
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.
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.
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