MODULE 25 COMMERCIAL PAPER 191

3. Other issues
4. Instrument may be postdated or antedated and remain negotiable
(1) Bank is not liable for damages to customer if it pays on postdated check before date on check
unless individual notifies bank not to pay check earlier in a separate written document
(2) Once customer does this, bank is liable for any damages caused by early payment
5. Instrument may have a provision that by endorsing or cashing it, the payee acknowledges full sat-

isfaction of debt and remain negotiable

6. If an instrument is payable to order of more than one person
(1) Either payee may negotiate or enforce it if payable to him/her in the alternative
EXAMPLE: "Pay $100 to the order of X or Y." Either X or Y may endorse it.
(2) All payees must negotiate or enforce it if not payable to them in the alternative
7. If not clear whether instrument is draft or note, holder may treat it as either
8. UCC requires only that a negotiable instrument need be written, must lend itself to permanence,

and must be easily transferable (i.e., movable).

9. Negotiation
10. There are two methods of transferring commercial paper
11. By assignment
(1) Assignment occurs when transfer does not meet all requirements of negotiation
(2) Assignee can obtain only same rights that assignor had, and is subject to any defenses that can
be asserted against assignor
12. By negotiation
(1) One receiving negotiable instrument by negotiation is called a holder
(2) If holder further qualifies as a holder in due course (as discussed later) s/he can obtain more
rights than what transferor had
(3) There are two methods of negotiation
(a) Negotiating order paper requires both endorsement by transferor and delivery of instru-
ment
1] Order paper includes negotiable instruments made payable to the order of X
(b) Negotiating bearer paper may be accomplished by delivery alone (endorsement not neces-
sary)
EXAMPLE: A check is made payable to the order of cash.
1] Subsequent parties may require endorsements (even though UCC does not) for iden-
tification
2] Holder may, in any event, endorse it if s/he chooses to do so
(4) Endorsement (Indorsement) refers to signature of payee, drawee, accommodation endorser, or
holder
13. Types of endorsements
14. Blank endorsement
(1) Does not specify any endorsee
EXAMPLE: A check made to the order of M on the front can be endorsed in blank by M writing only his
signature on the back. -
(2) Converts order paper into bearer paper
(3) Note that bearer paper may be negotiated by mere delivery; hence a finder, or even a thief, can
be a valid holder
EXAMPLE: B endorses a check in blank that had been made payable to his order. He lost it and C found it
who delivered it to D. D is a valid holder since C's endorsement was not required.
b. Special endorsement