Law Summary
Certain Sum Defined
- The payable sum is certain even if it includes interest, installments, exchange rate variation, collection costs, or attorney fees upon default.
Unconditional Promise or Order
- An order or promise to pay is unconditional despite references to specific funds or transactional statements.
- A promise to pay only from a specific fund is conditional and not unconditional.
Determinable Future Time
- Defined as payment at a fixed period after date or sight, on or before a fixed or determinable date, or after a specified event that is certain to occur.
- Payment upon an uncertain contingency is not negotiable.
Additional Provisions and Negotiability
- Additional acts beyond payment of money void negotiability.
- Provisions authorizing sale of collateral, confession of judgment, waiver of protections, or options other than money payment do not affect negotiability.
- Illegal provisions remain invalid.
Instrument Validity Despite Omissions
- Valid even if undated, lacks specified value, place of issue or payment, bears a seal, or specifies a particular kind of money.
- Does not repeal laws requiring statement of consideration.
Payable on Demand Instruments
- Payable on demand if expressed as such or no time is stated.
- An instrument issued or endorsed overdue is payable on demand by the party making, accepting, or endorsing it.
Payable to Order
- Payable to order when drawn to the order of a specified person or to him or his order.
- Payee must be reasonably identified.
- Payee can be the maker, drawer, drawee, one or multiple payees, or holders of an office.
Payable to Bearer
- Payable to bearer if so expressed, payable to a named person or bearer, fictitious payee known to maker, non-personal payee name, or last blank endorsement.
Use of Terms and Dates
- Instrument terms need not follow the Act’s language but must clearly show intention to comply.
- Dates on instrument are prima facie evidence of the true date.
- Antedating or postdating does not invalidate unless for illegal purposes.
- Date may be inserted if missing; wrong date does not avoid the instrument for holders in due course.
Handling of Blanks
- Possessor may fill blanks with prima facie authority.
- Completed instruments valid against subsequent holders in due course even if filled incorrectly but within reason and authority.
- Unauthorized completion of undelivered blanks invalid against prior parties.
Delivery and Contract Completion
- Delivery is essential to effect the contract.
- Delivery must be by or authorized by the party making, drawing, accepting, or endorsing until reaching holder in due course.
- Delivery presumed valid if instrument held by holder in due course or former signatory.
Interpretation of Ambiguous Instruments
- Discrepancies between words and figures favor words unless ambiguous.
- Interest runs from date of instrument or issue if undated.
- Written provisions prevail over printed ones.
- Ambiguity as to instrument type may be treated as bill or note.
- Unclear signer capacity deemed indorser.
- Multiple signers on "I promise to pay" notes are jointly and severally liable.
Signatures and Capacity
- No liability without signature except as provided.
- Trade or assumed names bind as real names.
- Agents may sign with authority, established like other agency.
- Signing in representative capacity discloses when liability is to principal only.
- Signatures by procuration indicate limited authority.
- Indorsement by infants or corporations transfers property without binding liability.
- Forged signatures are void unless forgery is estopped.
Consideration Presumptions and Definitions
- Instruments presumed issued for value; signatories presumed parties for value.
- Value includes any consideration supporting a simple contract, including antecedent debts.
- Holder for value includes those giving value at any time, including holders with liens.
- Absence or failure of consideration is a defense except against holders in due course.
- Accommodation parties sign without value to lend name, still liable to holders for value.
Negotiation of Instruments
- Negotiation is transfer making transferee the holder.
- Bearer instruments negotiated by delivery; order instruments by endorsement plus delivery.
- Endorsements must be on the instrument or attached paper and cover entire instrument.
- Endorsements can be special (naming indorsee), blank (payable to bearer), restrictive, qualified, or conditional.
- Restrictive endorsements limit negotiation and vest title in trust or agency.
- Qualified endorsements limit indorser liability (e.g., "without recourse").
- Conditional endorsements do not affect the payer's duty to pay.
- Special indorsements to two or more payees require all signatures unless authorized.
- Misdescribed or misspelled payee names may be endorsed as described with optional correct signature.
- Endorsement presumed timely and at place of instrument date.
- Negotiable character continues until restrictive endorsement or discharge.
- Holder may strike out unnecessary endorsements.
- Transfer without endorsement vests title but requires endorsement to qualify as holder in due course.
- Prior parties may reissue and negotiate back subject to prior personal liability.
Rights of Holders
- Holder may sue in own name; payment to holder discharges instrument.
- Holder in due course requirements: Complete and regular on face, obtained before due date without notice of dishonor, in good faith and for value, without notice of title defects.
- Not holder in due course if instrument payable on demand negotiated unreasonably late.
- Notice of defects before full payment limits holder in due course rights to amount paid.
- Defective title includes fraud, duress, illegality.
- Holder in due course free from prior defects and may sue all liable parties.
- Other holders subject to all original defenses; those deriving from holder in due course enjoy same rights if not parties to fraud.
- Burden on holder to prove holder in due course if title defective.
Liability of Parties
- Maker promises to pay instrument according to tenor, admitting payee existence and capacity.
- Drawer admits payee existence and capacity, guarantees payment upon presentment and payment if dishonored unless liability limited.
- Acceptor engages to pay according to acceptance, admitting drawer's signature genuineness and payee's capacity.
- Signers not designated as maker, drawer, or acceptor are indorsers unless otherwise specified.
- Irregular indorsers liable according to payee's role and circumstances.
- Negotiation warranties include genuineness, title, capacity of prior parties, and knowledge of defects.
- General indorsers warrant validity and subsistence at indorsement and agree to pay if dishonored.
- Indorsement liability follows the order of indorsements; joint indorsers are jointly and severally liable.
- Agents negotiating without indorsement liable unless disclosing principal.
Presentment for Payment
- Presentment not necessary to charge maker or acceptor but necessary to charge drawer and indorsers except as excused.
- Non-demand instruments must be presented on due date; demand instruments must be presented within reasonable time.
- Presentment must be made by holder or authorized person, at reasonable hour, proper place, to person primarily liable.
- Place of presentment follows instrument's specified place or usual business/residence.
- Instrument must be exhibited on presentment and delivered up upon payment.
- Presentment at bank during banking hours is required.
- Presentment to personal representative if liable party dead.
- Presentment to any partner suffices for partner liability even after dissolution; multiple non-partner debtors must all be presented.
- Presentment not required where drawer or indorser has no right to expect payment.
- Delay excused when beyond holder's control.
- Presentment dispensed with where reasonably impractical, drawee is fictitious, or waived.
- Dishonor by nonpayment occurs if payment refused after presentment or presentment excused and unpaid when overdue.
- Immediate recourse accrues to parties secondarily liable upon dishonor.
- Maturity computed excluding start day, including payment day; holidays postpone payment.
- Payment in due course means payment at or after maturity to holder in good faith without defect notice.
Notice of Dishonor
- Notice required to drawer and each indorser or they are discharged except as otherwise provided.
- Notice may be given by holder or any party liable who may seek reimbursement.
- Notice by agent valid.
- Notice benefits subsequent holders and parties with recourse.
- Notice must be given within prescribed times either in same or different places.
- Notice may be given personally or by mail; proper address rules apply.
- Notice may be waived expressly or impliedly.
- Protest not required except for foreign bills; waiver of protest also waives presentment and notice of dishonor.
- Delay excused when beyond holder control.
Discharge of Instruments
- Discharged by due payment, cancellation, acts discharging simple contracts, or principal debtor becoming holder after maturity.
- Secondary parties discharged by discharge of instrument, cancellation of signature, discharge of prior party, tender of payment, release of principal debtor unless reserved, or agreement extending time unless consented.
- Secondary party paying instrument retains rights against prior parties.
- Holder may renounce rights expressly; unconditional renunciation discharges instrument but not rights of holder in due course without notice.
- Unintentional cancellations ineffective; burden of proof on party alleging unintentional cancellation.
- Material alteration voids instrument except against consenting parties and does not affect holder in due course.
- Material alterations include changes to date, sum, time or place, parties, currency, or adding place of payment.
Bill of Exchange and Acceptance
- Bill of exchange: unconditional order in writing, signed, payable on demand or future time to order or bearer.
- Bill does no