B-102
ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 24
THE FUNCTION AND CREATION OF
NEGOTIABLE INSTRUMENTS
24-1A. Bearer instruments
(Chapter 24—Pages 473–474)
The court held that lottery tickets were not governed by the UCC but by the state lottery statute, which
24-2A. Requirements for negotiation
(Chapter 24—Pages 467–468)
This case was decided under the unrevised Article 3, but the result under the revised Article 3 would
24-3A. Requirements for negotiation
(Chapter 24—Page 468)
This case was decided under the unrevised Article 3, but the result under the revised Article 3 would be
the same. The court held that the notes were negotiable. The court explained that the unrevised UCC
3–106 “does not explicitly mention variable rate notes (‘VRNs’) because when the U.C.C. was developed
in the 1950s and adopted in the 1960s, VRNs were virtually unknown. The necessity for VRNs came
about as a result of the volatile financial markets of the late 1970s. By the mid-1980s, VRNs accounted
for 60% of the total loans made in this country. That dominance in the financial markets has continued
24-4A. Undated instruments
(Chapter 24—Page 471)
24-5A. Requirements for negotiation
(Chapter 24—Pages 467–468)
No. The court granted the FDIC’s motion for summary judgment. The court pointed out that “[t]o
24-6A. Negotiable versus nonnegotiable instruments
(Chapter 24—Pages 473–474)
If the instrument was a bearer instrument, then Broadway’s possession qualified it as a holder. If it was
an order instrument, wherein a specifically named payee must be determined upon the face of the
instrument, then Broadway could not qualify as a holder. The court, citing the official comments to the
24-7A. Negotiability
(Chapter 24—Page 471)
Regent filed a motion for summary judgment, which the court granted. The court found that each draft
declared on its face that it was payable a specified number of days after the bill of lading date, which
was on another writing. For this reason, the drafts were nonnegotiable instruments. On appeal, a state
24-8A. Words versus figures
(Chapter 24—Page 475)
The court held that Galatia Bank was entitled to rely on the imprinted section of the check. UCC 3–114
indicates that words control figures unless the words are ambiguous, and handwritten terms control
typewritten and printed terms, and typewritten control printed. The question here was whether
B-106 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 24
alterations, the amount shown on the imprint should control whether the number is in words or figures.
* * * We think, however, that the purposes of the U.C.C. are best served by considering an amount
24-9A. Fixed amount of money
(Chapter 24—Page 468)
The Texas state trial court ruled in favor of Remington on this issue, but the Court of Appeals of Texas