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Published byAdam Isgrigg Modified over 10 years ago
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Payee or later holder indorses a note or check. Happens automatically regardless of indorser’s intent.
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Secondary Liability Three conditions precedent must occur before the holder can sue the indorser.
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Note – holder previously presented to maker. Draft (e.g., check) – holder previously presented to drawee (e.g., bank on which the check is drawn; the drawer’s bank). Must be done within 30 days of indorsement.
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Note – Maker refuses to pay. Draft (e.g., check) – Drawee refuses to pay (e.g., the check bounces for insufficient funds, closed account, etc.).
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General Rule = Indorser is given notice of the dishonor within 30 days of the dishonor. Collecting Bank = Indorser is given notice of the dishonor by the midnight deadline.
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An indorser may disclaim liability by including the phrase “without recourse” in the indorsement.
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Presumed liable in order of signatures. Sue prior indorsers for payment. Liable to later indorsers.
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DrawerPayee – I1 BigelowSnow Bascombe – I2 Drawee Jordan State Bank – I3 Rogers An indorser in chain of title is a sub-surety and can recover all from earlier indorser.
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MakerBank CharliePayee Lucy – I1 Schroeder – I2 Pig Pen – I3 Patty – I4 An indorser not in chain of title is a co-surety and is only entitled to contribution.
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MakerIvory MarianPayee “Without recourse” Friendly Loan Co.
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