Article 10p. 10

COMMERCIAL LAWS NEGOTIABLE INSTRUMENTS, CORPORATION, INSURANCE, TRANSPORTATION, BANKING

(a)That it is complete and regular upon its face;

(b)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;

(c)That he took it in good faith and for value;

(d)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.

SECTION 53. When Person Not Deemed Holder 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.

SECTION 54. 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.

SECTION 55. When Title Defective . — The title of a person

who negotiates an instrument is defective within the

meaning of this Act 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.

SECTION 56. What Constitutes Notice of 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.

SECTION 57. 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.

SECTION 58. When Subject to Original Defenses . — 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 non-negotiable. 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.

SECTION 59. Who is Deemed Holder in Due Course . —

Every holder is deemed prima facie to be a holder in due

course; but when it is shown that the title of any 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 such defective title.

CHAPTER V Liabilities of Parties

SECTION

60. 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.

SECTION 61. 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.

SECTION 62. Liability of Acceptor . — The acceptor by

accepting the instrument engages that he will pay it

according to the tenor of his acceptance; and admits —

(a)The existence of the drawer, the genuineness of his

signature, and his capacity and authority to draw the

instrument; and

(b)The existence of the payee and his then capacity to

indorse.

SECTION 63. 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.

SECTION 64. 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, in accordance with the following rules:

(a)If the instrument is payable to the order of a third

person, he is liable to the payee and to all subsequent

parties.

(b)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.

(c)If he signs for the accommodation of the payee, he is

liable to all parties subsequent to the payee.

SECTION 65. Warranty Where Negotiation by Delivery

and

So

Forth .

—

Every

person

negotiating

an

instrument by delivery or by a qualified indorsement

warrants —

(a)That the instrument is genuine and in all respects what

it purports to be;

(b)That he has a good title to it;

(c)That all prior parties had capacity to contract;

(d)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

extends in favor of no holder other than the immediate

transferee.

The provisions of subdivision (c) of this section do not

apply

to

persons

negotiating

public

or

corporation

securities, other than bills and notes.

SECTION

66. Liability

of

General

Indorser .

—

Every

indorser who indorses without qualification, warrants,

to all subsequent holders in due course —

(a)The matters and things mentioned in subdivisions (a),

(b), and (c) of the next preceding section; and

(b)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.

SECTION

67. Liability

of

Indorser

Where

Paper

Negotiable by Delivery . — Where a person places his

indorsement on an instrument negotiable by delivery he

incurs all the liabilities of an indorser.

SECTION 68. Order in Which Indorsers are Liable . — 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.

SECTION 69. Liability of an Agent or Broker . — Where a

broker or other agent negotiates an instrument without

indorsement, he incurs all the liabilities prescribed by

section sixty-five of this Act, unless he discloses the name

© Compiled by RGL

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