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Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond
Edition 9ISBN: 978-1133586562Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond
Edition 9ISBN: 978-1133586562 Exercise 16
Facts
Heinz and his friend Manny met at a local fast-food restaurant for lunch. Heinz made out a check payable to "Cash" for $150 and gave it to Manny to whom he owed money. On the way home, a roaming gang, whose leader was Bugsy, stopped Manny, knocked him down, and took the check, which fell out of Manny's shirt pocket during the fight that ensued. Bugsy then passed this check on to his friend Armand who owned a pawn shop, to pay for an inexpensive watch that he purchased for his girlfriend. When Manny discovered what Bugsy had done with the check, he (Manny) requested Armand pay him the $150 or return the check. Armand refused. Manny then brought a lawsuit in a local court against Armand to recover the check or $150, claiming that the check rightfully belonged to him (Manny). Armand insisted through his attorney that he had a right to keep the $150 check that he had received from Bugsy, because he had no knowledge that Bugsy had stolen the check.
At Trial
At trial, the judge made the statement that when a negotiable instrument is made out to "Cash" (i.e., made payable to "Cash"), it is a bearer instrument, and she quoted UCC Section 3-201 as her source. The judge defined a bearer instrument (again quoting UCC 3-201) as one that is payable to anyone to whom the instrument is given by a simple transfer from one person to another. (In other words "here is the check.") The judge distinguished the term "bearer instrument" from an "order instrument," claiming that an order instrument could be transferred from one person to another only if the person giving the instrument first indorsed it (placed a signature on the back of the check) and then transferred (delivered) it to a third party. The judge concluded her review of the case by emphasizing that the legal term of passing on the instrument is called negotiation and that this legal term was significant where the transfer of negotiable instruments was concerned.
QUESTIONS
1. The check in this problem is considered a bearer instrument. How is a bearer instrument negotiated?
2. Did Bugsy receive the check by negotiation? Did he gain rights by this negotiation?
3. Did Armand receive the check by negotiation? Was he correct when he stated that he had a right to keep the check?
4. Did Manny receive the check by negotiation? Did he have rights after the check was stolen from him?
Heinz and his friend Manny met at a local fast-food restaurant for lunch. Heinz made out a check payable to "Cash" for $150 and gave it to Manny to whom he owed money. On the way home, a roaming gang, whose leader was Bugsy, stopped Manny, knocked him down, and took the check, which fell out of Manny's shirt pocket during the fight that ensued. Bugsy then passed this check on to his friend Armand who owned a pawn shop, to pay for an inexpensive watch that he purchased for his girlfriend. When Manny discovered what Bugsy had done with the check, he (Manny) requested Armand pay him the $150 or return the check. Armand refused. Manny then brought a lawsuit in a local court against Armand to recover the check or $150, claiming that the check rightfully belonged to him (Manny). Armand insisted through his attorney that he had a right to keep the $150 check that he had received from Bugsy, because he had no knowledge that Bugsy had stolen the check.
At Trial
At trial, the judge made the statement that when a negotiable instrument is made out to "Cash" (i.e., made payable to "Cash"), it is a bearer instrument, and she quoted UCC Section 3-201 as her source. The judge defined a bearer instrument (again quoting UCC 3-201) as one that is payable to anyone to whom the instrument is given by a simple transfer from one person to another. (In other words "here is the check.") The judge distinguished the term "bearer instrument" from an "order instrument," claiming that an order instrument could be transferred from one person to another only if the person giving the instrument first indorsed it (placed a signature on the back of the check) and then transferred (delivered) it to a third party. The judge concluded her review of the case by emphasizing that the legal term of passing on the instrument is called negotiation and that this legal term was significant where the transfer of negotiable instruments was concerned.
QUESTIONS
1. The check in this problem is considered a bearer instrument. How is a bearer instrument negotiated?
2. Did Bugsy receive the check by negotiation? Did he gain rights by this negotiation?
3. Did Armand receive the check by negotiation? Was he correct when he stated that he had a right to keep the check?
4. Did Manny receive the check by negotiation? Did he have rights after the check was stolen from him?
Explanation
Verified
Verified
1.
A bearer instrument is negotiated by ...
Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond
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