After completing this chapter, students will be able to: Explain the process of transferring negotiable instruments from one person to another; distinguish order paper from bearer paper, and blank, special, restrictive, and qualified indorsements; identify and explain requirements for becoming a holder in due course. | Commercial Paper Negotiable Instruments Negotiation & Holder in Due Course Liability of Parties Checks and Electronic Transfers 7 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Negotiation & Holder in Due Course P A E T R H C 32 “Behind all its global responsibilities and impersonal style banking is still a ‘people business’ it may be the most personal business of all for it always depends on the original concept of credit, meaning trust.” Anthony Sampson, The Moneylenders: Bankers in a Dangerous World (1981) Learning Objectives Negotiation Indorsements Holder in Due Course & Rights 32 - Under UCC Revised Article 3, negotiation is the transfer of voluntary or involuntary possession of a negotiable instrument by a person (other than issuer) to another person who becomes its holder [3–201] Instrument may be: Order paper: “to order of named payee” Bearer paper: “to bearer” or “to cash” Overview 32 - When an employer gives an . | Commercial Paper Negotiable Instruments Negotiation & Holder in Due Course Liability of Parties Checks and Electronic Transfers 7 McGraw-Hill/Irwin Business Law, 13/e © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Negotiation & Holder in Due Course P A E T R H C 32 “Behind all its global responsibilities and impersonal style banking is still a ‘people business’ it may be the most personal business of all for it always depends on the original concept of credit, meaning trust.” Anthony Sampson, The Moneylenders: Bankers in a Dangerous World (1981) Learning Objectives Negotiation Indorsements Holder in Due Course & Rights 32 - Under UCC Revised Article 3, negotiation is the transfer of voluntary or involuntary possession of a negotiable instrument by a person (other than issuer) to another person who becomes its holder [3–201] Instrument may be: Order paper: “to order of named payee” Bearer paper: “to bearer” or “to cash” Overview 32 - When an employer gives an employee a paycheck payable “to the order of Susan Adams,” she is the holder of the check because she is in possession of an instrument payable to an identified person (Susan Adams) and she is that person. A person is a holder if in possession of an instrument (1) that is payable to bearer or (2) made payable to an identified person and she is that identified person [1–201(20)] Order paper: instrument is payable to the order of a specific payee Negotiated by transfer of possession of paper after indorsement by the payee [3–201(b)] Bearer paper: instrument is payable “to bearer” or “to cash” Negotiated by mere transfer of possession of paper [3–201(b)] Indorsement: Signature, alone or with words, made on an instrument for a specific purpose May not be that of maker, drawer, acceptor Indorsement required for negotiation except in the case of depositary banks Form of indorsement may affect attempts to negotiate the instrument further Indorsement may be subject to rescission due to, ., lack
