RIGOS BAR REVIEW SERIES UNIFORM MULTISTATE ESSAY EXAM (MEE) REVIEW CHAPTER 6 UCC ARTICLE 3 COMMERCIAL PAPER

R Magic Memory Outlines

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INTRODUCTION A. Advantages Over Ordinary Contracts B. Two-Party Paper C. Three-Party Paper 1. Check 2. Draft D. Certificate of Deposit NEGOTIABLE INSTRUMENT NUTSS A. Negotiable Words 1. Order Paper 2. Bearer Paper 3. Contradictory Terms a. Handwritten, Typed, and Printed b. Amount B. Unconditional Promise to Pay 1. Promise to Pay Only 2. Future Contract 3. Non-Violating Conditions 4. Surety Involvement 5. Legal Right Retention Clause C. Time Certain 1. Face of Instrument 2. Dates and Substitution 3. Extension or Acceleration Provisions 4. Occurrence Time Uncertain 5. Undated Instrument D. Sum Certain in Money 1. Currency of Any Country 2. Permissible Inclusions 3. Open Sum and Option E. Signed by Maker/Drawer 1. Acceptable Signatures 2. Representative Liability

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F. Issue and Incomplete Instruments 1. Issue Requirement 2. Incomplete Instrument a. Enforceable When Properly Completed b. Examples c. Payee Incomplete d. Improperly Completed III. HOLDER IN DUE COURSE FINNS A. For Value 1. Gift Donee 2. Partial HDC 3. Future Performance B. In Good Faith C. No Notice D. Negotiation 1. Order Paper 2. Bearer Paper 3. Prohibited Negotiation E. Shelter Rule 1. Look Up the Ladder 2. Example 3. Cannot Improve Position F. Exceptions to Negotiation Requirement 1. Fictitious Payee a. Dummy Vendor b. Phantom Employee 2. Impostor REAL OR PERSONAL DEFENSE A. Personal Defenses MUUFFO 1. Mutual Mistake 2. Unauthorized Completion 3. Uncompletion of a Condition Precedent 4. Fraud in the Inducement 5. Failure of Consideration 6. Others Claims 7. Federal Trade Commission B. Real Defenses FIDDLS FUM 1. General Real Defenses a. Fraud in Execution b. Illegality c. Discharge in Bankruptcy d. Duress

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e. Lack of Capacity f. Statute of Limitations g. Forgery h. Unauthorized Signature i. Material Alteration 2. Forgery, Unauthorized Signature, Material Alteration Exceptions a. Examples b. Recharacterizing From Real Defense to Personal c. Negligent Supervision d. Comparative Negligence V. LIABILITY OF PARTIES A. Primary 1. Issue and Acceptance 2. Co-Makers 3. Liability for Dishonored Checks B. Secondary 1. In General a. Chronological Liability b. Conditions Precedent c. Banks and HDC Limitations 2. Types of Indorsements a. Unqualified / Blank b. Special c. Restrictive d. Qualified Without Recourse e. Payment Guaranteed f. Collection Guaranteed g. Accommodation Indorser h. Payment in Full C. Indorsers Skeleton D. Warranty Liability 1. Transfer Parties Warranties GANDS a. Good Title b. Alterations Not Present c. No Knowledge of Insolvency d. Defenses Not Present e. Signatures are Genuine and Authorized 2. Presentment Party Warranties GAD a. Good Title b. Alterations Not Present c. Drawers Signature is Authorized 3. Excluded Subjects 4. Exception to Warranty Liability

5. Warranty Disclaimer E. Underlying Obligation VI. IMPROPER NEGOTIATION A. In General B. Makers/Drawers Signature Forged 1. Bank Liability and Recovery 2. Exception for Owners Negligence C. Payee Designation Incomplete D. Indorsers Signature Forged E. Enforcement of Lost, Destroyed, or Stolen Instruments F. Forgery is a Crime / Tort

VII. ARTICLE 4 BANK DEPOSITS AND COLLECTIONS A. Drawees Responsibilities 1. Wrongful Honor 2 No Duty to Presenter 3. Overdue / Postdated / Overdraft 4. Hold Periods 5. Multiple Payees 6. Wrongful Dishonor B. Stop Payment Order and Transaction Sequence 1. Oral Orders 14 Days 2. Written Orders 6 Months 3. Bank Decides Sequencing C. Unauthorized Signature or Alteration 1. Period to Report a. Businesses 60 days b. Consumers 1 year 2. Forged Instrument Liability 3. Drawers Negligence Exception D. Comparative Negligence E. Certification F. Subrogation Rights VIII. EXAM APPROACH TO ESSAY ANSWERS A. Introduction B. Question Facts C. Question Requirements D. Fact Sequential Diagram E. Model Answer