Ch. 14: Negotiable Instruments: Liability, Defenses, and Discharge – No. 1
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
SIGNATURE LIABILITY: SECONDARY
Secondary Liability: A contingent requirement to pay a
(2) the instrument is dishonored; and
(3) the secondarily liable party is given timely notice
of dishonor.
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 3
Clarkson et al.’s Business Law (13th ed.)
SECONDARY LIABILITY: DISHONOR
Dishonor: A maker, acceptor, or drawee dishonors an
instrument when the maker or acceptor refuses to pay, or the
drawee refuses to accept or honor, the instrument
within the prescribed time following presentment or
when presentment is excused.
the holder refuses to exhibit the actual instrument,
provide identification, or sign the instrument or a
receipt for it; or
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 4
Clarkson et al.’s Business Law (13th ed.)
SECONDARY LIABILITY: PRESENTMENT
Proper Party: The party to whom presentment must be made
depends on the type of instrument involved:
(1) a note or CD must be presented to the maker; whereas
(2) a draft or check must be presented to the drawee.
Timeliness
(1) A time instrument must be presented for acceptance on
or before its due date and for payment on its due date;
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 5
Clarkson et al.’s Business Law (13th ed.)
SECONDARY LIABILITY: NOTICE
(b) written notice (including e-mail, fax, etc.), and
(c) notice written or stamped on the instrument; and
(2) within a reasonable time, meaning
Clarkson et al.’s Business Law (13th ed.)
ACCOMMODATION PARTIES
Accommodation Party: A person who signs an instrument
The accommodated party, by contrast, has no right to
seek contribution from an accommodation party.
Accommodation Maker: An accommodation party who
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 7
Clarkson et al.’s Business Law (13th ed.)
AGENTS
principal (e.g., employee).
Principal: A person who agrees to have an agent act on
his behalf (e.g., employer).
the instrument understood her not to be personally liable.
If an agent signs a check payable from the principal’s
account using only her personal name, and the check
identifies the principal, the agent is not personally liable.
Clarkson et al.’s Business Law (13th ed.)
UNAUTHORIZED SIGNATURES
Unauthorized Signature: As a general rule, unauthorized
instrument bearing an unauthorized indorsement will bear the
burden of loss, unless the unauthorized indorsement is that of
the payee, in which case the loss falls on the drawer/maker.
Imposter: One who, by use of the mails, telephone, or
example, where a dishonest employee (1) issues an
instrument on his employer’s behalf, or (2) deceives the
employer into signing an instrument payable to a party
with no right to receive payment.
Clarkson et al.’s Business Law: Commercial Law for Accountants (1E)
SIGNATURE LIABILITY: SECONDARY
Secondary Liability: A contingent requirement to pay a
(2) the instrument is dishonored; and
(3) the secondarily liable party is given timely notice
of dishonor.
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 3
Clarkson et al.’s Business Law (13th ed.)
SECONDARY LIABILITY: DISHONOR
Dishonor: A maker, acceptor, or drawee dishonors an
instrument when the maker or acceptor refuses to pay, or the
drawee refuses to accept or honor, the instrument
within the prescribed time following presentment or
when presentment is excused.
the holder refuses to exhibit the actual instrument,
provide identification, or sign the instrument or a
receipt for it; or
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 4
Clarkson et al.’s Business Law (13th ed.)
SECONDARY LIABILITY: PRESENTMENT
Proper Party: The party to whom presentment must be made
depends on the type of instrument involved:
(1) a note or CD must be presented to the maker; whereas
(2) a draft or check must be presented to the drawee.
Timeliness
(1) A time instrument must be presented for acceptance on
or before its due date and for payment on its due date;
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 5
Clarkson et al.’s Business Law (13th ed.)
SECONDARY LIABILITY: NOTICE
(b) written notice (including e-mail, fax, etc.), and
(c) notice written or stamped on the instrument; and
(2) within a reasonable time, meaning
Clarkson et al.’s Business Law (13th ed.)
ACCOMMODATION PARTIES
Accommodation Party: A person who signs an instrument
The accommodated party, by contrast, has no right to
seek contribution from an accommodation party.
Accommodation Maker: An accommodation party who
Ch. 27: Negotiable Instruments: Liability, Defenses, and Discharge – No. 7
Clarkson et al.’s Business Law (13th ed.)
AGENTS
principal (e.g., employee).
Principal: A person who agrees to have an agent act on
his behalf (e.g., employer).
the instrument understood her not to be personally liable.
If an agent signs a check payable from the principal’s
account using only her personal name, and the check
identifies the principal, the agent is not personally liable.
Clarkson et al.’s Business Law (13th ed.)
UNAUTHORIZED SIGNATURES
Unauthorized Signature: As a general rule, unauthorized
instrument bearing an unauthorized indorsement will bear the
burden of loss, unless the unauthorized indorsement is that of
the payee, in which case the loss falls on the drawer/maker.
Imposter: One who, by use of the mails, telephone, or
example, where a dishonest employee (1) issues an
instrument on his employer’s behalf, or (2) deceives the
employer into signing an instrument payable to a party
with no right to receive payment.