Negotiable Instruments, Payments and Credits

by Warren, William D.; Walt, Steven D.

• ISBN13: 9781587787409
• ISBN10: 1587787407
• Edition: 6th
• Format: Hardcover
• Copyright: 2004-06-03
• Publisher: West Academic

Summary

This law school casebook updates the previous edition with materials on Revised Articles 3 (Negotiable Instruments), 4 (Bank Deposits and Collections), 5 (Letters of Credit) and 8 (Investment Securities), as well as new Article 4A (Funds Transfers). New Problems and Notes are integrated with cases to allow convenient treatment of statutory innovations. Relevant federal law is considered throughout.

Table of Contents

Preface	iii
Acknowledgments	v
Table of Cases	xix
Table of Statutes	xxiii
Negotiability and Holders in Due Course	1	(80)
Introduction	1	(1)
Concept of Negotiability	2	(12)
Historical Origin	2	(3)
Merger Doctrine	5	(1)
Negotiation and Transfer	5	(1)
Negotiation	5	(1)
Transfer	6	(1)
Problems	7	(1)
Discharge	8	(1)
Problem	8	(2)
Problem	10	(1)
Holder in Due Course: Freedom From Claims and Defenses	11	(1)
Problem	11	(1)
Claims of Ownership	12	(1)
Problem	12	(1)
Ordinary Defenses	13	(1)
Real Defenses	13	(1)
Claims in Recoupment	13	(1)
Problem	14	(1)
Formal Requisites of Negotiable Instruments	14	(9)
Taylor v. Roeder	16	(5)
Notes	21	(2)
Requirements for Holder in Due Course	23	(58)
Good Faith and Notice	23	(2)
Kaw Valley State Bank & Trust Co. v. Riddle	25	(7)
Note	32	(1)
Problems	32	(1)
Maine Family Federal Credit Union v. Sun Life Assurance Co.	33	(9)
Notes	42	(1)
Overdue or Irregular Instruments	43	(1)
Problem	43	(2)
Problems	45	(1)
Negotiability in Consumer Transactions	45	(1)
Introduction	45	(1)
Universal C.I.T. Credit Corp. v. Ingel	45	(3)
Note	48	(2)
The Legislative Response	50	(1)
Consumer Credit Sales	50	(2)
Purchase Money Loans	52	(1)
New Subsection 3--305(e)	53	(1)
Gonzalez v. Old Kent Mortgage Company	54	(4)
Note	58	(1)
Payee as Holder in Due Course	59	(1)
Transactions With Fiduciaries	60	(1)
Problem	61	(1)
Smith v. Olympic Bank	62	(3)
Note	65	(1)
Problem	66	(1)
Note: Uniform Fiduciaries Act	66	(1)
Problem	67	(1)
Value	67	(1)
Introduction	67	(1)
Problems	68	(1)
Rights of Depositary Bank in Deposited Check	69	(1)
Problem	70	(1)
Note	71	(2)
Article 9 Security Interest as Value	73	(1)
Bowling Green, Inc. v. State Street Bank & Trust Co.	74	(3)
Notes	77	(4)
Liability of Parties to Negotiable Instruments	81	(42)
Liability of Maker	81	(1)
Problem	81	(1)
Drawers, Drawees and Acceptors	82	(3)
Problems	82	(3)
Problem	85	(1)
Liability of Indorser	85	(2)
Problems	85	(2)
Liability of Transferor	87	(1)
Problem	87	(1)
Cashier's Checks and Teller's Checks	88	(16)
Use in Payment of Obligations	89	(1)
Problem	90	(1)
Payment With Notice of Adverse Claim	90	(1)
Right to Stop Payment	90	(1)
Problems	91	(1)
Issuing Bank Delays Payment	92	(1)
Problem	92	(1)
Issuing Bank's Right to Raise Own Claims or Defenses	93	(1)
State Bank & Trust v. First State Bank of Texas	93	(5)
Note	98	(1)
Problem	99	(1)
Lost Instruments	99	(1)
Lost Instruments under Section 3--309	99	(1)
Problem	100	(1)
Note	100	(1)
Lost Cashier's, Teller's or Certified Checks under Section 3--312	100	(1)
Diaz v. Manufacturers Hanover Trust Co.	101	(2)
Problems	103	(1)
Accommodation Parties	104	(9)
Liability of Accommodation Party and Rights Against Accommodated Party	104	(1)
Accommodated Party Is Individual	104	(1)
Problem	104	(2)
Problem	106	(1)
Accommodated Party Is Business Organization	106	(1)
Problem	106	(1)
Plein v. Lackey	107	(4)
Suretyship Defenses	111	(2)
Signatures by Representatives	113	(3)
Liability of Agent on Notes	113	(1)
Problems	114	(1)
Liability of Agent on Checks	114	(1)
Medina v. Wyche	114	(2)
Accord and Satisfaction	116	(7)
Gelles & Sons, Inc. v. Jeffrey Stack, Inc.	117	(3)
Problem	120	(1)
Notes	121	(2)
Payment Systems: Checks and Credit Cards	123	(71)
Check Collection	123	(49)
Time Check Is Paid by Payor Bank	124	(1)
The Midnight Deadline	124	(1)
Problems	124	(3)
Blake v. Woodford Bank & Trust Co.	127	(10)
Notes	137	(2)
What Is a Payor Bank?	139	(1)
Problems	139	(1)
Check Kiting	140	(1)
First National Bank in Harvey v. Colonial Bank	140	(9)
Notes	149	(1)
Effect of Regulation CC on the Midnight Deadline	150	(1)
Oak Brook Bank v. Northern Trust Company	151	(3)
Notes	154	(1)
Right of Collecting Bank to Revoke Settlement on Dishonored Check	155	(1)
Essex Construction Corporation v. Industrial Bank of Washington, Inc.	155	(3)
Note	158	(1)
Check Encoding	158	(1)
Problem	159	(1)
First Union National Bank v. Bank One, N.A.	160	(3)
Note	163	(1)
Electronic Presentment	163	(1)
Under UCC	163	(3)
Under Federal Law: ``The Check 21 Act''	166	(2)
Funds Availability and Regulation CC	168	(1)
Funds Availability	169	(1)
Check Collection and Return	170	(2)
Credit and Debit Cards	172	(22)
Introduction	172	(1)
Credit Cards	172	(1)
How Credit Cards Function	172	(2)
The Perils of Success	174	(1)
Debit Cards	174	(2)
Liability for Unauthorized Use of Cards	176	(1)
Credit Cards	176	(1)
Problems	177	(1)
Debit Cards	178	(1)
Problem	179	(1)
When Is Use Authorized?	179	(1)
Minskoff v. American Express Travel Related Services Company, Inc.	180	(6)
Notes	186	(1)
Problem	187	(1)
Assertion of Cardholder of Defenses	187	(2)
Problem	189	(1)
Izraelewitz v. Manufacturers Hanover Trust Co.	189	(2)
Notes	191	(1)
Internet Fraud	192	(1)
Problem	192	(2)
Payment Systems: Electronic Transfers	194	(40)
Electronic Funds Transfers	194	(34)
The Basic Transaction Covered by Article 4A	194	(3)
Payment Orders	197	(1)
Grossman v. Nationsbank, N.A.	197	(4)
Note	201	(1)
Problem	202	(1)
Acceptance of Payment Order	202	(1)
Problem	203	(1)
Receiver Finality	203	(1)
Aleo International, Ltd. v. Citibank	203	(2)
Notes	205	(1)
The ``Money-Back Guarantee''	206	(1)
Grain Traders, Inc. v. Citibank, N.A.	206	(7)
Notes	213	(1)
Erroneous Execution of Payment Orders	214	(1)
Sending Bank's Errors	214	(1)
Discharge-for-Value Rule	215	(1)
Failure of Receiving Bank to Execute Payment Order	216	(1)
Problems	217	(1)
Note	217	(1)
Fraudulent Payment Orders	218	(2)
Problems	220	(1)
Incorrectly Identified Beneficiary	221	(1)
Problem	221	(1)
Corfan Banco Asuncion Paraguay v. Ocean Bank	222	(3)
Note	225	(1)
Automated Clearing House (ACH)	226	(1)
Consumer Transfers	226	(1)
Commercial Transfers	227	(1)
Emerging Trends in Funds Transfers	228	(6)
Stored Value Cards	228	(2)
Internet Payments	230	(1)
Online Banking and Bill Paying	231	(3)
Fraud, Forgery, and Alteration	234	(66)
Forgery	234	(53)
Allocation of Loss Between Customer and Payor Bank	234	(1)
Introduction	234	(1)
Negligence of Customer Contributing to Forgery	235	(1)
Thompson Maple Products, Inc. v. Citizens National Bank	235	(4)
Problems	239	(1)
Failure of Customer to Report Forgery	240	(2)
Espresso Roma Corporation v. Bank Of America, N.A.	242	(6)
Notes	248	(1)
Problems	249	(1)
Note: Fraud Prevention Measures	250	(1)
Validity of Contractual ``Cutdown'' Clauses	251	(1)
National Title Insurance Corporation Agency v. First Union National Bank	252	(4)
Note	256	(1)
Right of Payor Bank to Recover Mistaken Payment of Check	256	(1)
Forged Checks	256	(1)
Problem	257	(1)
Forged Indorsement	258	(1)
Problem	258	(1)
Pre--Authorized Checks	259	(1)
Overdrafts	260	(1)
Conversion Actions Regarding Checks Bearing Forged Indorsement	260	(1)
Action by Payee	260	(1)
Introduction	260	(1)
Problem	261	(2)
Delivery of Check to Payee	263	(1)
Liability of Depositary Bank as Agent for Collection	263	(1)
Unauthorized Indorsement	264	(1)
Problem	264	(1)
Forgery by Entrusted Employee of Payee	265	(1)
Action by Drawer	266	(1)
Stone & Webster Engineering Corp. v. First National Bank & Trust Co.	267	(3)
Problem	270	(1)
Impostors and Fictitious Payees	271	(1)
Intent of Issuer	271	(2)
Impostors	273	(1)
Problems	273	(1)
Title Insurance Company of Minnesota v. Comerica Bank-California	274	(3)
Note	277	(1)
Fictitious Payees	277	(2)
The Double Forgery	279	(1)
Gina Chin & Associates, Inc. v. First Union Bank	279	(2)
Note	281	(1)
Payroll Padding	282	(1)
Allocation of Loss By Contract	283	(1)
Jefferson Parish School Board v. First Commerce Corporation	283	(3)
Problem	286	(1)
Note	286	(1)
Alteration	287	(6)
Complete Instruments	287	(1)
HSBC Bank USA v. F & M Bank Northern Virginia	288	(4)
Note	292	(1)
Incomplete Instruments	292	(1)
Restrictive Indorsements	293	(7)
Problem	294	(1)
State of Qatar v. First American Bank	294	(4)
Problem	298	(2)
The Bank--Customer Relationship	300	(45)
Introduction	300	(1)
Stop-Payment Orders	301	(11)
Proving Loss under 4--403(c)	301	(3)
Dunnigan v. First Bank	304	(6)
Operational Issues	310	(1)
Problems	310	(1)
Note: Postdated Checks	311	(1)
Section 4--303 and the ``Four Legals''	312	(6)
Claims Affecting the Customer's Account	312	(1)
Priority Rules of Section 4--303	313	(1)
W & D Acquisition, LLC v. First Union National Bank	314	(3)
Problem	317	(1)
``High-to-Low'' Basis of Posting	318	(1)
Wrongful Dishonor	319	(11)
Loucks v. Albuquerque National Bank	320	(6)
Notes	326	(4)
The Bank--Customer Agreement	330	(15)
Disclosure: The Truth--in--Savings Act	330	(3)
``Freedom of Contract'' under Section 4--103(1)	333	(1)
Problems	334	(2)
Service Charges and Fees	336	(1)
Introduction	336	(1)
Perdue v. Crocker National Bank	336	(5)
Note	341	(1)
Federal Preemption	341	(1)
Problem	342	(1)
Arbitration Clauses	342	(1)
Federal Arbitration Act	342	(1)
Unconscionability	343	(2)
Letters of Credit	345	(80)
Introduction	345	(3)
Sources of Letter of Credit Law	348	(2)
Formal Requirements	350	(5)
Wichita Eagle and Beacon Publishing Company, Inc. v. Pacific National Bank of San Francisco	351	(1)
Notes	352	(2)
Problems	354	(1)
Issuer's Duty to Honor or Dishonor	355	(35)
The Strict Compliance Standard	355	(1)
Voest-Alpine Trading USA Corp. v. Bank of China	356	(8)
Notes	364	(5)
Notice of Discrepancies: Waiver and Preclusion	369	(2)
Esso Petroleum Canada v. Security Pacific Bank	371	(5)
Note	376	(1)
Problems	376	(1)
Issuer's Right to Reimbursement and Other Remedies	377	(1)
Reimbursement	377	(1)
Standard of Compliance	378	(1)
Subrogation, Restitution and Breach of Warranty	379	(1)
Ochoco Lumber Company v. Fibrex & Shipping Company, Inc.	380	(5)
Note	385	(1)
Note: Restitution and Breach of Warranty	386	(1)
Problems	387	(1)
Damages for Wrongful Dishonor	388	(1)
Problems	389	(1)
Forgery and Fraud	390	(13)
Intraworld Industries, Inc. v. Girard Trust Bank	391	(8)
Notes	399	(4)
Problem	403	(1)
Transfer, Assignment and Security Interests	403	(7)
Transfer and Assignment	403	(3)
Problems	406	(1)
Security Interests	406	(3)
Letters of Credit as Supporting Obligations	409	(1)
Letters of Credit in Bankruptcy	410	(15)
Matter of Compton Corp.	411	(7)
Notes	418	(7)
Appendix. Promissory Notes	425	(8)
Index	433