Bearer paper - can be negotiated by anyone holding the instrument, anyone holding the paper can negotiate it.
Order paper - can only be negotiated by the person authorized in the order e.g. "Payable to XYZ" only XYZ can negotiate it.
a) False. "Payable to cash" makes the check a bearer paper, anyone with the check, e.g. someone who found it on the street can cash it.
b) False. "Payable to T " and endorsed by T without any remarks is a blank endorsement which makes the check a bearer paper, anyone with the check, e.g. someone who found it on the street can cash it.
c) True. "Payable to bearer" makes the check initially a bearer paper, but by making a special endorsement to be specifically paid to J makes it order paper.
d) False. A blank endorsement makes the check a bearer paper.
a) No. A draft requires three parties, drawer, drawee, and payee. The instrument only has payer and payee (cash).
b) No. An order paper can only be negotiated by the person authorized in the order e.g. "Payable to XYZ" only XYZ can negotiate it. This is payable to cash meaning it can be negotiated by anyone holding it, a bearer paper.
c) Yes. It has all the requirements to be negotiable i) signature by the maker ii) contains the terms "payable to bearer or to order" in this case cash means bearer iii) a certain sum of payment $250 plus 6% annualized interest iv) definite time, 30 days after the written date v) has no conditional statements on how and when payments will be made.
d) Yes. The maker is the payer of the instrument and signed it.
e) Yes. This instrument is payable to cash meaning it can be negotiated by anyone holding it, a bearer paper. Hence, it doesn't require endorsement.
Refer to the case Eutsler v First National Bank, Pawhuska
The issue is whether plaintiff can recover for money loss from the bank (defendant) due to a check his brother cashed by forging his endorsement.
Trial court granted summary judgment in favor of the defendant, plaintiff appealed.
Appeals court reversed judgment, case went to the State Supreme Court.
Relevant Terms, Laws, and Cases
UCC 3-404 - states that an unauthorized signature (e.g. forgery, signing without consent of holder) used for endorsement is invalid unless the payee ratifies the signing.
The State Supreme Court reversed the decision; plaintiff will not recover the money lost.
The court applied UCC 3-404, if, the plaintiff "ratified" the signature then he will not be able to recover. The court defined ratified as having intent to ratify and full knowledge of material facts. The court argued that since the plaintiff knew it was his brother that forged the signature and waited for his brother to return the money, it was ratification by conduct.