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Instruments Taken for an Obligation

Learn how a negotiable instrument taken as payment for an obligation may impact the scope or enforceability of the underlying obligation for which the instrument was taken.

Transcript

Imagine a law student agreed to purchase textbooks from a bookstore for $500 and, as payment, issued a $500 check to the bookstore. Generally speaking, there’s a distinction between the law student’s contractual liability to the bookstore and her liability under the draft. However, a negotiable instrument taken as payment for an obligation may affect such an underlying obligation.

Article 3 contains detailed rules addressing such effects, which we’ll discuss in this lesson.

I. Instrument Taken...

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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