Chapter 16 - The Nature of Negotiable Instruments
indorsement may be on either side of the instrument, although it is usually placed on
6. The phrase “foot the bill” comes from the practice of signing one’s name at the
bottom of a bill to indicate acceptance of payment. However, the current popular
usage of the phrase indicates an acceptance to pay, making it similar to an
7. If a person is required by law to pay on a negotiable instrument, he or she may be said
to have to “shell out.” This colloquialism dates to colonial America when money was
scarce, and people often paid debts in shelled corn.
VII. Related Cases
1. Duncan Savings & Loan Association issued a money order for $24,190 payable to
McAffrey Funeral Home. When the instrument was presented for payment, Duncan
Savings and Loan refused payment because McAffrey had put a stop payment on the
money order. The court ruled that a drawer bank (Duncan Savings & Loan) on a
personal money order is liable notwithstanding a stop payment order unless able to
prove a valid defense. The S&L could not assert a defense, so it was required to pay
on the order. First National Bank of Nocona v. Duncan Savings & Loan Association,
656 F.Supp. 358 (W.D. Okla. 1987).
2. Intending to make a loan, X gave Y a check for $20,000, but neglected to sign the
check. The following day Y deposited the check to his account and delivered to X a
note promising to pay back the $20,000. A year later after Y defaulted, X sued the
bank for cashing his check without his signature. The court ruled against X
recognizing that the bank was relieved from liability, since X, accepted the note and
received payment on it constituting a ratification of the bank’s payment of the
unsigned check. Spec-Cast, Inc. v. First National Bank and Trust Co. of Rockford,
538 N.E.2d 543 (Ill. 1989).
3. A husband signed his wife’s name to a promissory note without her knowledge or
permission. In a bankruptcy proceeding, the court recognized that the wife was not
liable for the note because an unauthorized signature is wholly inoperative as that of
the person whose name is signed, unless that person later ratifies it. The wife neither
signed nor ratified the note. The court ruled, however, that she continued to be liable
on a preexisting note that was cancelled in reliance on the new note containing the
signature of the husband and the forged signature of the wife. In re Grove, 73 B.R.
(D. Minn. 1987).
4. The Alabama Supreme Court in Foster v. Hacienda Nirvana, Inc. applied the UCC’s
six-year statute of limitations for negotiable instruments to bar a claim for $200,000
based on the sale of horses. The plaintiffs’ unsuccessfully argued that a 10-year
statute of limitations applied if the promissory note was a contract under seal and also
that a contract under seal could not be a negotiable instrument.
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