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§ 4332. Value defined

Value is any consideration sufficient to support a simple contract. An antecedent or pre-existing debt constitutes value, and is deemed such whether the instrument is payable on demand or at a future time.

§ 4333. Holder for value

Where value has at any time been given for the instrument, the holder is deemed a holder for value in respect to all parties who become such prior to that time.

§ 4334. Lien holder as holder for value

Where the holder has a lien on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien.

§ 4335. Want of consideration; effect

Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.

84336. Liability of accommodation party

An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person. Such a person is liable on the instrument to a holder for value, notwithstanding such holder at the time of taking the instrument knew him to be only an accommodation party.

Article C-Negotiation

§ 4341. Negotiation defined

An instrument is negotiated when it is transferred from one person to another in such manner as to constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery; if payable to order it is negotiated by the indorsement of the holder completed by delivery.

§ 4342. Indorsement; method

The indorsement must be written on the instrument itself or upon a paper attached thereto. The signature of the indorser, without additional words, is a sufficient indorsement.

§ 4343. Indorsement must be of entire instrument

The indorsement must be an indorsement of the entire instrument. An indorsement which purports to transfer to the indorsee a part only of the amount payable, or which purports to transfer the instrument to two or more indorsees severally, does not operate as a negotiation of the instrument. But where the instrument has been paid in part, it may be indorsed as to the residue.

§ 4344. Kinds of indorsement

An indorsement may be either special or in blank; and it may also be either restrictive or qualified, or conditional.

§ 4345. Special indorsement; indorsement in blank

A special indorsement specifies the person to whom, or to whose order, the instrument is to be payable; and the indorsement of such indorsee is necessary to the further negotiation of the instrument. An indorsement in blank specifies no indorsee; and an instrument so indorsed is payable to bearer and may be negotiated by delivery.

§ 4346. Indorsement in blank; change to special indorsement

The holder may convert a blank indorsement into a special indorsement by writing over the signature of the indorser in blank any contract consistent with the character of the indorsement.

§ 4347. Restrictive indorsement

An indorsement is restrictive, which either:

(1) prohibits the further negotiation of the instrument; or (2) constitutes the indorsee the agent of the indorser; or

(3) vests the title in the indorsee in trust for or to the use of some other person.

But the mere absence of words implying power to negotiate does not make an indorsement restrictive.

§ 4348. Restrictive indorsement; effect; rights of indorsee

A restrictive indorsement confers upon the indorsee the right: (1) to receive payment of the instrument;

(2) to bring any action thereon that the indorser could bring; (3) to transfer his rights as such indorsee, where the form of the indorsement authorizes him to do so.

But all subsequent indorsees acquire only the title of the first indorsee under the restrictive indorsement.

§ 4349. Qualified indorsement

A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It may be made by adding to the indorser's signature the words "without recourse" or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument.

§ 4350. Conditional indorsement

Where an indorsement is conditional, a party required to pay the instrument may disregard the condition, and make payment to the indorsee or his transferee, whether the condition has been fulfilled or not. But any person to whom an instrument so indorsed is negotiated will hold the same, or the proceeds thereof, subject to the rights of the person indorsing conditionally.

§ 4351. Indorsement of instrument payable to bearer

Where an instrument, payable to bearer, is indorsed specially it may nevertheless be further negotiated by delivery; but the person indorsing specially is liable as indorser to only such holders as make title through his indorsement.

§ 4352. Indorsement of instrument payable to two or more

persons

Where an instrument is payable to the order of two or more payees or indorsees who are not partners, all must indorse, unless the one indorsing has authority to indorse for the others.

§ 4353. Instrument drawn or indorsed to "cashier"

Where an instrument is drawn or indorsed to a person as "cashier" or other fiscal officer of a bank or corporation, it is deemed prima facie to be payable to the bank or corporation of which he is such officer, and may be negotiated by either the indorsement of the bank or corporation or the indorsement of the officer.

8 4354. Indorsement where name wrongly designated or mis

spelled

Where the name of a payee or indorsee is wrongly designated or misspelled, he may indorse the instrument as therein described, adding, if he thinks fit, his proper signature.

§ 4355. Indorsement in representative capacity

Where any person is under obligation to indorse in a representative capacity, he may indorse in such terms as to negative personal liability. § 4356. Time of indorsement; presumption

Except where an indorsement bears date after the maturity of the instrument, every negotiation is deemed prima facie to have been effected before the instrument was overdue.

§ 4357. Place of indorsement; presumption

Except where the contrary appears, every indorsement is presumed prima facie to have been made at the place where the instrument is dated.

§ 4358. Continuation of negotiable character

An instrument negotiable in its origin continues to be negotiable until it has been restrictively indorsed or discharged by payment or otherwise.

§ 4359. Striking out indorsement

The holder may at any time strike out any indorsement which is not necessary to his title. The indorser whose indorsement is struck out, and all indorsers subsequent to him, are thereby relieved from liability on the instrument.

§ 4360. Transfer without indorsement

Where the holder of an instrument payable to his order transfers it for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee acquires, in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually made.

§ 4361. Renegotiation by prior party

Where an instrument is negotiated back to a prior party that party may, subject to the provisions of this chapter, reissue and further negotiate the same. But he is not entitled to enforce payment thereof against any intervening party to whom he was personally liable.

Article D-Rights of Holder

§ 4371. Right of holder to sue; payment

The holder of a negotiable instrument may sue thereon in his own name and payment to him in due course discharges the instrument. § 4372. Holder in due course defined

A holder in due course is a holder who has taken the instrument under the following conditions:

(1) that it is complete and regular upon its face;

(2) that he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact;

(3) that he took it in good faith and for value;

(4) that at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.

§ 4373. Holder not in due course

Where an instrument payable on demand is negotiated an unreasonable length of time after its issue, the holder is not deemed a holder in due course.

§ 4374. Notice before full amount paid

Where the transferee receives notice of any infirmity in the instrument or defect in the title of the person negotiating the same before he has paid the full amount agreed to be paid therefor, he will be deemed a holder in due course only to the extent of the amount theretofore paid by him.

§ 4375. Defective title

The title of a person who negotiates an instrument is defective within the meaning of this chapter when he obtained the instrument, or any signature thereto, by fraud, duress, or force and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith, or under such circumstances as amount to a fraud. § 4376. Notice of infirmity or defect

To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.

§ 4377. Rights of holder in due course

A holder in due course holds the instrument free from any defect of title of prior parties, and free from defenses available to prior parties among themselves, and may enforce payment of the instrument for the full amount thereof against all parties liable thereon.

§ 4378. Original defenses; availability

In the hands of any holder other than a holder in due course, a negotiable instrument is subject to the same defenses as if it were nonnegotiable. But a holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.

§ 4379. Holder in due course; presumption; burden of proof

Every holder is deemed prima facie to be a holder in due course; but when it is shown that the title of a person who has negotiated the instrument was defective, the burden is on the holder to prove that he or some person under whom he claims acquired the title as holder in due course. But the last-mentioned rule does not apply in favor of a party who became bound on the instrument prior to the acquisition of the defective title.

Article E-Liabilities of Parties

§ 4381. Liability of maker

The maker of a negotiable instrument by making it engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse.

§ 4382. Liability of drawer

The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that on due presentment the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. But the drawer may insert in the instrument an express stipulation negativing or limiting his own liability to the holder.

§ 4383. Liability of acceptor

The acceptor by accepting the instrument engages that he will pay it according to the tenor of his acceptance; and admits:

(1) the existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and

(2) the existence of the payee and his then capacity to indorse.

§ 4384. When person deemed indorser

A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.

§ 4385. Liability of irregular indorser

Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser, accordance with the following rules:

in

(1) If the instrument is payable to the order of a third person, he is liable to the payee and to all subsequent parties.

(2) If the instrument is payable to the order of the maker or drawer, or is payable to bearer, he is liable to all parties subsequent to the maker or drawer.

(3) If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee.

§ 4386. Warranty on negotiation by delivery or by qualified indorsement

A person negotiating an instrument by delivery or by a qualified indorsement, warrants:

(1) that the instrument is genuine and in all respects what it purports to be;

(2) that he has a good title to it;

(3) that all prior parties had capacity to contract;

(4) that he has no knowledge of any fact which would impair the validity of the instrument or render it valueless.

But when the negotiation is by delivery only, the warranty does not extend in favor of a holder other than the immediate transferee. Paragraph (3) of this section does not apply to persons negotiating public or corporation securities, other than bills and notes.

§ 4387. Liability of general indorser

An indorser who indorses without qualification, warrants to all subsequent holders in due course:

(1) the matters and things specified by paragraphs (1), (2), and (3) of section 4386 of this title; and

(2) that the instrument is at the time of his indorsement valid and subsisting.

And, in addition, he engages that on due presentment it shall be accepted or paid, or both, as the case may be, according to its tenor, and that if it be dishonored, and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder, or to any subsequent indorser who may be compelled to pay it. 84388. Liability of indorser when paper negotiable by delivery Where a person places his indorsement on an instrument negotiable by delivery he incurs all the liabilities of an indorser.

84389. Order of indorsers' liability

As respects one another indorsers are liable prima facie in the order in which they indorse; but evidence is admissible to show that as between or among themselves they have agreed otherwise. Joint payees or joint indorsees who indorse are deemed to indorse jointly and severally.

§ 4390. Liability of agent or broker

Where a broker or other agent negotiates an instrument without indorsement he incurs all the liabilities prescribed by section 4386 of

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