For
your convenience, here is a collection of all the slides shown in
the video review lectures.
Please Note: The National Conference of Commissioners on Uniform State Laws and the American Law Institute approved a revision of UCC article 1 in 2001, and approved amendments to article 3 in 2002 and 2003. This revision and these amendments changed not only the content of the law, but also the numbering of many statutory sections. These lectures are based on the revised and amended versions of these articles. You should take care to look for differences when reading older cases. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
I. ENFORCEMENT OF NEGOTIABLE INSTRUMENTS AND RECOVERY OF NEGOTIABLE INSTRUMENTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
A. Two Basic Kinds of Actions Involving Negotiable Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1. Sometimes plaintiffs sue to enforce payment of a negotiable instrument. Taylor v. Roeder; Kaw Valley State Bank v. Riddle; Maine Family Federal v. Sun Life; Universal C.I.T. v. Ingel; Gonzalez v. Old Kent Mortgage. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2. Other times plaintiffs sue to recover possession of a negotiable instrument or its proceeds. Miller v. Race; Smith v. Olympic Bank; Bowling Green v. State Street Bank. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
B. Arguments Made in Enforcement Actions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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B. Recovery | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Plaintiff's Claim | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defendant is in wrongful possession of an instrument of its proceeds. 3-306 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defendant's Typical Response | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The claim is inapplicable to HIDC. 3-306 |
II. LIABILITY ON NEGOTIABLE INSTRUMENTS
1. | Liability of Parties on Checks |
drawee | 3-408, 3-409(d), 4-402 | ||
drawer | 3-414(b),(c) | ||
indorser | 3-415(a),(b),(c),(e) | ||
transferor | 3-416(a),(c) | ||
stop payment orders | 4-403(a) | ||
Example 1: Liability on Ordinary Checks |
Drawee Bank | ||||||
PTO Payee | PTO X | |||||
/s/ Drawer | /s/ Payee | |||||
Drawer | ---------------------> | Payee | --------------> | X | ------> | Y |
<----- | ||||||
$ |
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2. | Cashier's, Teller's, and Certified Checks |
refusal to pay | 3-411(b), 3-305(c) | ||
merger doctrine | 3-310(a),(b)(3) | ||
lost instrument | |||
-- enforce as loser | 3-309(a), (b) | ||
-- declaration of loss | 3-312 |
Example 2: Teller's Check Transaction |
Bank B | ||||
PTO Seller | ||||
/s/ Bank A | ||||
Bank A | ------------------> | Debtor |
--------------> | Creditor |
<------------------ | (remitter) |
<-------------- | ||
$$ |
discharge |
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of debt |
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3. | Accommodation Parties and Representatives |
contribution | 3-116(a),(b) | ||
reimbursement | 3-419(f) [formerly 3-419(e)] | ||
represented party | 3-402(a) | ||
representative | 3-402(b) | ||
Example 3: | Example 4: | |||||||||||
Accommodation | Representatives | |||||||||||
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4. | Accord and Satisfaction on Checks |
accord and satisfaction requirements | 3-311 | ||
reservation of rights | 1-308(b) [formerly 1-207(2)] |
III. CHECK COLLECTION
check | ||||||||||
drawer | -------> | payee | ------> | depositary | ------> | intermed. | ----> | payor | ----> | drawer |
<------ | bank |
<------ | bank |
<---- | bank | <---- | ||||
credit | credit | debit | debit |
DEPOSITARY BANK |
1. | crediting customer's account for deposited check | |||||||||||||||||||||||||
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2. | revoking credit from customer's account | |||||||||||||||||||||||||
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3. | forwarding checks to payor bank | |||||||||||||||||||||||||
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PAYOR BANK |
1. | decision to return check | ||||||||||||
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2. | expeditious return requirement | ||||||||||||
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IV. FORGED SIGNATURES ON CHECKS
Example # 1 : FORGED DRAWER'S SIGNATURE |
PTO payee |
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/s/ customer |
payee |
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thief | -----------------> | payee | ---------> | depositary | -----> | payor |
<----------------- | <--------- | bank |
<----- | bank |
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goods |
$$ |
$$ |
Example # 2: FORGED INDORSEMENT |
PTO payee |
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/s/ customer |
payee |
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customer | ------------------> | payee | ---------> | thief | ---------> | depositary | ---> | payor |
<------------------ | stolen |
<--------- | bank |
<--- | bank |
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goods |
$$ |
$$ |
1. May the payor bank charge the customer's account? |
properly payable rule | 4-401 | ||
exceptions | |||
-- negligence | 3-406(a),(b); 3-103(a)(9) [formerly 3-103(a)(7)] | ||
-- reporting delay | 4-406(c),(d)(1)&(2),(e) |
2. May the payor bank recover for breach of warranty? |
presenment warranties | |||
-- entitled to enforce | 4-208(a)(1), 3-417(a)(1) | ||
-- no knowledge of forged drawer's signature | 4-208(a)(3), 3-417(a)(3) |
3. May the payor bank obtain restitution? |
restitution for mistaken payment | 3-418(b) | ||
Price v. Neal exception | 3-418(c) |
4. May anyone else recover? |
transfer warranties | |||
-- all signatures authentic and authorized | 4-207(a)(2), 3-416(a)(2) | ||
-- entitled to enforce | 4-207(a)(1), 3-416(a)(1) | ||
conversion | 3-420(a) | ||
forged signature effective against signer | 3-403(a) |
5. What are the "special cases" rules regarding signatures? |
misnamed payee | 3-110(a), 3-204(d) | ||
nominal/ficitious payee | 3-404(a) | ||
impostor | 3-404(a) | ||
employee forgery | 3-405(b) |
V. FUNDS TRANSFERS
payment | ||||||||
order |
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originator | ---------> | originator's | -----> | intermed. | -----> | beneficiary's | -----> | beneficiary |
bank |
bank |
bank |
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duty to pay | 4A-402(b) | |||
money-back guarantee | 4A-402(c),(d) | |||
cancellation | 4A-211(b),(c) | |||
restitution for mistakes | 4A-303 | |||
misdescribed beneficiary | 4A-207 | |||
liability for orders sent by others | ||||
-- authorized | 4A-202(a) | |||
-- effective | 4A-202(b) | |||
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4A-203(a)(2) |
VI. CREDIT CARDS
Sample Credit Card Statement | |||||||||||||||
First Bank VISA |
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Monthly Billing Statement for November |
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Consumer Credit Protection Act / Truth in Lending Act |
asserting defenses | Sec. 170 [15 U.S.C. 1666i] | |
unauthorized use | ||
-- definition | Sec. 103(o) [15 U.S.C. 1602(o)] | |
-- liability | Sec. 133 [15 U.S.C. 1643] |
VII. LETTERS OF CREDIT
promise to |
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sell goods |
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seller |
--------------> | buyer |
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(Beneficiary) | <-------------- | (Applicant) | ||
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promise to |
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letter |
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pay |
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application |
of credit | | |
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\/ |
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\ ____ |
_________ |
bank |
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(Issuer) |
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1. | Beneficiary's possible claims |
Against | Claim | Section | Recovery | |||
Issuer | wrongful dishonor | 5-111(a),(e) | amount of credit | |||
Applicant | breach of contract | 5-103(d), cf. 2-703 | contract remedies | |||
2. | Applicant's possible claims |
Against | Claim | Section | Recovery | |||
Issuer | wrongful dishonor | 5-111(b),(e) | damages incurred | |||
Beneficiary | breach of contract | cf. 2-711 | contract remedies | |||
3. | Issuer's possible claims |
Against | Claim | Section | Recovery | |||
Applicant | rightful honor | 5-108(i)(1) | reimbursement | |||
Beneficiary | breach of contract | 5-117(a) | A's contract remedies | |||
via subrogration |