Rules Affecting Transferability

332 words | 2 page(s)

The facts of this case are as follows: I went to my bank and wrote a check for $500 to ‘cash’ on my account. The teller did not have me indorse the check, but gave me the cash. The teller then took the check from the bank and gave it to Carol to cure a gambling debt. Carol then took the check to her bank, where she properly indorsed and deposited it to her account. In this case, Carol is, in fact, a holder in due course.

According to the Uniform Commercial Code (or UCC), Article 3, Section 302, the definition of a ‘holder in due course’ is specifically defined as one whose instrument bears no evidence of forgery or alteration, irregularity, or any other reason to question its authenticity. Further, the holder must have taken the instrument for value; in good faith; without notice that it was overdue or dishonored (or had an uncured default); without notice that it contains an unauthorized signature; without notice that others have claim to the instrument; and without notice that any party has defense or claim to recoupment (Legal Information Institute).

puzzles puzzles
Your 20% discount here.

Use your promo and get a custom paper on
"Rules Affecting Transferability".

Order Now
Promocode: custom20

This instrument meets the requirements of negotiability, in that it is payable at the time of issuance, payable on demand and does not promise to do any act in addition to payment of money. However, it is debatable as to whether or not it was actually ‘payable to the bearer’ at the time of issuance, because the check was made out to ‘cash’ and the bearer at the time was actually Carol.

Effective and experienced legal counsel might be able to raise a creditable argument that Carol should have known the instrument was improper, as it was written out to ‘cash’ on the account of someone not involved in the transfer of the instrument (neither herself, nor the writer of the check). This argument would be clearly supported by ‘3-305(a), and could be a valuable method of refusing to recoup, according to the regulatory allowances.

puzzles puzzles
Attract Only the Top Grades

Have a team of vetted experts take you to the top, with professionally written papers in every area of study.

Order Now