978-0134004006 Chapter 23 Case

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Chapter 23
Holder in Due Course and Transferability
VI. Answers to Critical Legal Thinking Cases
23.1 Payable Jointly
No, Johnson’s signature alone was not sufficient to negotiate the check to Midland. An instrument can be
payable to two or more persons either jointly or alternatively. If an instrument is payable jointly, then
each person’s indorsement is necessary to negotiate the instrument. The use of the word “and” between
23.2 Assignment
No. The thirty-one promissory notes are not negotiable instruments and cannot be enforced against FFP
of each note the extent of the maker’s liability. In addition, the notes fail the requirement for an
unconditional promise because each note specifically “incorporates by reference” the terms of other
documents, requiring one to examine those documents to determine if they place conditions on payment.
The court of appeals held that the 31 promissory notes were not negotiable instruments and therefore the
Lexis 5277 (Court of Appeals of Texas, 2005)
VII. Answer to Ethics Case
23.3 Ethics Case
City Savings Bank, this special indorsement converted the check back to order paper. Under the UCC,
this special indorsement converted the check back to order paper and the check became payable only
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