# Business Law and the Legal Environment Study Set 1

## Quiz 28 :Kinds of Instruments, Parties, and Negotiability

Question Type
Nation-Wide Check Corp. sold money orders through local agents. A customer would purchase a money order by paying an agent the amount of the desired money order plus a fee. The customer would then sign the money order as the remitter or sender and would fill in the name of the person who was to receive the money following the printed words "Payable to." In a lawsuit between Nation-Wide and Banks, a payee on some of these orders, the question was raised as to whether these money orders were checks and could be negotiable even though not payable to order or to bearer. Are the money orders negotiable instruments? [Nation-Wide Check Corp. v Banks 260 A2d 367 (DC)]
Free
Essay

Refer to the case Nation-Wide Check Corp v Banks (260 A2d 367).
Case Issue
The issue is whether the money orders purchased from defendant are negotiable instruments
Trial court held that the money order were negotiable. Defendant appealed.
Relevant Terms, Laws, and Cases
UCC 3-104 - defines what provisions for something to be a negotiable instrument. It must be signed by the maker, payable to bearer or to order with a certain sum, at a definite time, and has no conditional statements on how and when payments will be made.
Opinion
The higher court reversed the decision and ordered for retrial.
The higher court found many issues with this case and also noted that the money order was not properly made to be payable to order (in this case; hence, it is non-negotiable. The issue in this case is that the term " payable to" doesn't equate to "payable to order ".

Tags
Choose question tag
Abby Novel signed a note with the following on it: "Glen Gallwitz 1-8-2002 loaned me $5,000 at 6% interest a total of$10,000.00." The note did not contain a payment schedule or a time for repayment. Abby used the $10,000 as start-up money for her business and says that she orally agreed to repay the loan out of the proceeds from her first 1,000-product sales. Abby did not make any payments. Glen passed away and his son, as executor of his estate, demanded that Abby repay the$10,000 plus 6% interest for a total of $14,958 (the amount due as of April 2010). The trial court granted judgment for the estate. Abby has appealed, alleging that she repaid the note through the care she gave for Glen. The estate maintains that the instrument was a negotiable promissory note and that it is entitled to collect the amount due in cash. Who is correct and why? [ Gallwitz v. Novel , 2011 WL 303253 (Ohio App.)] Free Essay Answer: Answer: Miss AB signed a note on 1-8-2002 stating that Mr. X loaned Miss AB$ 5,000 at 6% interest for a total of $10,000. The note did not contain the payment schedule and repayment time. Later AB used the money for the startup of her business and informed orally that she will repay the loan out of the proceeds from her first 1,000 product sales but AB did not make any payments. After that, the person X has passed away, and his son as an executor of his estate, demanded AB for the repayment in the month ( April 2010). The trail court judgement she appealed that she had repaid the note through the care she gave to Mr. X Promissory note: A promissory note is written agreement or document made and signed by the maker, engaging those to pay on demand or at a particular time or period stating certain amount of money to the bearer. In this situation Mr. X has made a note without mentioning the repayment date and time and after so many years his son was asking to repay the note with interest rate mentioned as per the note. According to the negotiable instrument act the promissory note which was made on 1-8-2002 and asked for repayment after almost 8 years that is April 2010 thus the person as more years has passed, he will not have the right to claim for the repayment. Moreover the time of payment and date are not mentioned in the note, as a result the promissory note will become invalid. On the other hand, Miss. AB was stating that she repaid the loan and previously she reported to X person that she will repay the loan out of the proceeds from her first 1,000 product sales. Therefore, Miss AB was correct and person Y who is the son of person X cannot claim for the repayment of the note because of the mentioned reasons. Hence, Miss. AB was not liable for the repayment of the note as she already paid it to Mr. X before his death. Tags Choose question tag George S. Avery signed a letter regarding the unpaid balance on a$20,000 promissory note owed to Jim Whitworth in the form of a letter addressed to Whitworth stating: "This is your note for $45,000.00, secured individually and by our Company for your security, due February 7, 1984." The letter was signed: "Your friend, George S. Avery." It was typed on stationery with the name of Avery's employer, V L Manufacturing Co., Inc., printed at the bottom and the words "George Avery, President" printed at the top. Avery says he is not personally liable on the note. The court granted summary judgment for Whitworth and Avery appealed. Who is liable? [Avery v Whitworth 414 SE2d 725 (Ga App)] Free Essay Answer: Answer: Refer to the case Avery v Whitworth (414 SE2d 725). Case Issue The issue is whether the executive is personally liable, as a signor, for a signed promissory note for money lent to his company. Relevant Terms, Laws, and Cases Personal liability - an employee of a company can be personally liable if they sign a contract or promissory note for their company to guarantee payment. However, they are not personally liable if they signed within a representative capacity as an agent of their company. Southern Oxygen Supply Co. v. de Golian - court decision that held that the form of signature determines whether a signor is personally liable for a note, regardless if the pre-printed type on the note had his position and company name. Opinion The higher court affirmed the decision. The executive is personally liable for payment. The higher court applied the decision in Southern Oxygen Supply to determine whether the executive made his signature in a representative capacity, they decided he didn't. He signed it with the terms "your friend". Tags Choose question tag Master Homecraft Co. received a promissory note with a stated face value from Sally and Tom Zimmerman. The note was payment for remodeling their home and contained unused blanks for installment payments but contained no maturity date. When Master Homecraft sued the Zimmermans on the note, the couple argued that they should not be liable on the note because it is impossible to determine from its face the amount due or the date of maturity. Decide. [Master Homecraft Co. v Zimmerman 22 A2d 440 (Pa)] Essay Answer: Tags Choose question tag Atlas Capital, LLC's sole member and manager was Weston Wade Sleater. Mr. Sleater signed two promissory notes totaling$4,000,000 as the maker of the notes. The signature blocks of the notes read, "Weston Wade Sleater Atlas Marketing Group, L.C.," but the signature was only that of Mr. Sleater. Mr. Sleater is referred to as the maker of the note. Mr. Sleater failed to pay the notes and a bankruptcy trustee brought suit to collect the remaining amount due. Mr. Sleater maintains that the notes are not his, but those of Atlas Capital. Is he correct? Is Mr. Sleater liable on the notes? Discuss the ambiguity issues as well as the way the notes were signed. [ In re Bedrock Marketing , LLC, 404 B.R. 929 (D. Utah)]
Essay
Tags
Choose question tag
Harold H. Heidingsfelder signed a credit agreement as vice president of J. O. H. Construction Co. for a line of credit with Pelican Plumbing Co. The credit agreement contained the following language: In consideration of an open account privilege, I hereby understand and agree to the above terms. Should it become necessary to place this account for collection I shall personally obligate myself and my corporation, if any, to pay the entire amount due including service charges (as outlined above terms) thirty-three and one-third (331/3%) attorney's fees, and all costs of collection, including court costs. Signed [Harold H. Heidingsfelder] Company J. O. H. Construction Co., Inc. When J. O. H. Construction failed to make payment, Pelican, claiming it was a holder of a negotiable instrument, sued Heidingsfelder to hold him personally liable for his failure to indicate a representative capacity on the credit agreement. He claims that a credit application is not a negotiable instrument and that he could not be held personally liable. Is he right? [Pelican Plumbing Supply, Inc. v J. O. H. Construction Co., Inc. 653 So2d 699 (La)]
Essay
Tags
Choose question tag
The instrument shown here is a: a. Draft b. Postdated check c. Trade acceptance d. Promissory note
True False
Tags
Choose question tag
A company has in its possession the following instrument: This instrument is: a. Not negotiable until December 1, 1987 b. A negotiable bearer note c. A negotiable time draft d. A nonnegotiable note because it states that it is secured by a conditional sales contract
True False
Tags
Choose question tag
Charter Bank of Gainesville had in its possession a note containing the following provision: "This note with interest is secured by a mortgage on real estate, of even date herewith, made by the maker hereof in favor of said payee.... The terms of said mortgage are by this reference made a part hereof." When the bank sued on the note, it said it was a holder of a negotiable instrument. Is this instrument negotiable? [Holly Hill Acres, Ltd. v Charter Bank of Gainesville 314 So2d 209 (Fla App)]
Essay
Tags
Choose question tag
Under the Negotiable Instruments Article of the UCC, which of the following statements is correct regarding a check? a. A check is a promise to pay money. b. A check is an order to pay money. c. A check does not need to be payable on demand. d. A check does not need to be drawn on a bank.
Essay
Tags
Choose question tag
On October 14, 1980, United American Bank of Knoxville made a $1,700,000 loan to Frederic B. Ingram. William F. Earthman, the president of the bank and a beneficiary of the loan, had arranged for the loan and prepared the loan documents. Mr. Ingram and Mr. Earthman were old friends, and Mr. Ingram had loaned Mr. Earthman money in the past. Mr. Ingram was in jail at the time of this loan and was unable to complete the documents for the loan. Mr. Earthman says that Mr. Ingram authorized him to do the loan so long as it did not cost him anything to do it. Also on October 14, 1980, Mr. Earthman prepared and executed a personal$1,700,000 note to Mr. Ingram, using a standard Commerce Union Bank note form. Mr. Earthman wrote "Frederic B. Ingram" in the space for identifying the lending bank and also filled in another blank stating that the note would be due "Eighteen Months after Date." With regard to the interest, Mr. Earthman checked a box signifying that the interest would be "At the Bank's 'Prime Rate' plus % per year." Mr. Earthman then sold both of the notes, which ended up in the hands of third parties (holders in due course) who demanded payment. Mr. Ingram raised the defense that he had not authorized Mr. Earthman to handle the transactions. The third parties said the notes were negotiable instruments and they were entitled to payment without listening to Mr. Ingram's defenses. Mr. Earthman said his note to Mr. Ingram as well as the bank note from Mr. Ingram were not negotiable and that they could both raise defenses to the third parties seeking payment. Who is correct? What do you think of Mr. Earthman's banking processes and procedures? What ethical issues do you see in these loan transactions? [Ingram v Earthman 993 SW2d 611 (Tenn)]
Essay
Tags
Choose question tag
Which of the following instruments is subject to the provisions of the Negotiable Instruments Article of the UCC? a. A bill of lading b. A warehouse receipt c. A certificate of deposit d. An investment security
True False
Tags
Choose question tag
A note from Mark Johnson with HealthCo International as payee for $28,979.15 included the following language: [p]ayable in________ , Successive Monthly Installments of$ Each, and in 11 Successive Monthly Installments of $2,414.92 Each thereafter, and in a final payment of$2,415.03 thereafter. The first installment being payable on the ______day of ______20 _______, and the remaining installments on the same date of each month thereafter until paid. Johnson signed the note. Is it negotiable? [Barclays Bank, P.L.C. v Johnson 499 SE2d 769 (NC App)]
Essay
Tags
Choose question tag
An instrument reads as follows: Which of the following statements correctly describes this instrument? a. The instrument is nonnegotiable because it is not payable at a definite time. b. The instrument is nonnegotiable because it is secured by the proceeds of the sale of the ring. c. The instrument is a negotiable promissory note. d. The instrument is a negotiable sight draft payable on demand.
Essay
Tags
Choose question tag
Bellino made a promissory note that was payable in installments and contained the provision that on default of the payment of any installment, the holder had the option to declare the entire balance due and payable on demand. The note was negotiated to Cassiani, who sued Bellino for the full debt when there was a default on the installment. Is a note with an acceleration clause still negotiable? [Cassiani v Bellino 157 NE2d 409 (Mass)]
Essay
Tags
Choose question tag
Under the commercial paper article of the UCC, for an instrument to be negotiable, it must: a. Be payable to order or to bearer b. Be signed to the payee c. Contain references to all agreements between the parties d. Contain necessary conditions of payment
True False
. Smith has in his possession the following instrument: September 1, 2003 I, Selma Ray, hereby promise to pay Helen Savit One Thousand Dollars ($1,000) one year after date. This instrument was given for the purchase of Two Hundred (200) shares of Redding Mining Corporation, Interest 6%. Selma Ray (signature). What is this instrument? Is it negotiable? Essay Answer: Tags Choose question tag Lloyd and Mario Spaulding entered into a contract to purchase property from Richard and Robert Krajcir. The two Spaulding brothers signed a promissory note to the Krajcir brothers with the following language: "The amount of$10,000 [is] to be paid sellers at the time of the initial closing [delivery of the deed]; plus, the principal amount payable to sellers at the time of the final indorsement of the subject H.U.D. loan." In litigation over the note, the Spauldings said it was not a negotiable instrument. The lower court found it to be a negotiable promissory note and the Spaulding partners appealed. Is the note negotiable? [Krajcir v Egid 712 NE2d 917 (Ill App)]
Is the following instrument negotiable? I, Richard Bell, hereby promise to pay to the order of Lorry Motors Ten Thousand Dollars ($10,000) upon the receipt of the final distribution from the estate of my deceased aunt, Rita Dorn. This negotiable instrument is given by me as the down payment on my purchase of a 1986 Buick to be delivered in three weeks. Richard Bell (signature). Essay Answer: Tags Choose question tag The state of Alaska was a tenant in a large office building owned by Univentures, a partnership. The state made a lease payment of$28,143.47 to Univentures with state treasury warrant No. 21045102. Charles LeViege, the managing partner of Univentures, assigned the warrant to Lee Garcia. A dispute then arose among the Univentures partners, and the company notified the state that it should no longer pay LeViege the rent. The state placed a stop payment order on the warrant. Garcia claimed that he was a holder of a negotiable instrument and that the state owed him the money. The state claimed that a warrant did not qualify as a negotiable instrument. The warrant was in writing, was signed by the governor of the state, provided a definite sum of \$28,143.47, and stated that "it will be deemed paid unless redeemed within two years after the date of issue." The warrant stated that it was "payable to the order of Univentures." Does the warrant meet the requirements for a negotiable instrument? [National Bank v Univentures 824 P2d 1377 (Alaska)]