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Conversion of a Negotiable Instrument

Learn about the specific and peculiar rules surrounding an Article 3 claim for conversion of a negotiable instrument.

Transcript

Like any other form of tangible, moveable property, negotiable instruments can be converted, that is, misappropriated or stolen. To that end, Article 3 sets forth several rules addressing the conversion of negotiable instruments, which we’ll discuss in this lesson.

I. Conversion

As used in Article 3, conversion refers to the unauthorized exercise of control over another’s negotiable instrument, thereby depriving the owner of his or her right to use or possess the instrument. Although the...

Lessons

    • 1. Welcome
    • Welcome to Payment Systems
    2. Negotiability
    • Introduction to Negotiable Instruments
    • Negotiability Requirements I
    • Negotiability Requirements II
    • Rule against Additional Terms
    3. Key Terms in Article 3
    • Key Terms I
    • Key Terms II
    • Becoming a Holder
    • Negotiation
    • Indorsement
    4. Enforcement of Negotiable Instruments
    • Holder in Due Course: Value and Good Faith
    • Holder in Due Course: Without Notice
    • Close-Connectedness Doctrine and Shelter Rule
    • Defenses against Enforcement
    5. Liability on Negotiable Instruments
    • Obligations of the Parties
    • Instruments Taken for an Obligation
    • Accord and Satisfaction Using a Negotiable Instrument
    • Enforcement of Lost, Stolen, or Destroyed Instruments
    • Warranty Liability
    6. Dishonor, Payment, and Discharge
    • Dishonor of Negotiable Instruments
    • Payment of Negotiable Instruments
    • Discharge of Liability
    7. Misconduct and Mistake
    • Unauthorized Signatures and Alterations
    • The Negligence Rule
    • Imposters and Fictitious or Unintended Payees
    • Conversion of a Negotiable Instrument
    8. Bank Deposits and Collections
    • Introduction to Article 4
    • Collection: Depositary and Collecting Banks
    • Collection: Payor Banks
    • Payor Bank’s Relationship to Its Customers