Question

What requirements must an instrument meet to be negotiable? Why do you think these are requirements?

Do some quick Internet research concerning a case that involves a holder in due course. Briefly explain the facts of the case, and the court's decision. Do you agree with the outcome? Explain.

Answer 1

NEGOTIABLE INSTRUMENT

A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a contract, which promises the payment of money without condition, which may be paid either on demand or at a future date.

The requirements of a negotiable instrument are-1.It must be in writing.

2.It must be signed by the maker or drawer.

3.It must be an unconditional promise or order to pay.

4.It must be for a fixed amount in money.

5.It must be payable on demand or at a definite time.

6.It must be payable to order or bearer, unless it is a check.

Negotiable instruments are critical to our economy. They allow people to do business and to be certain that they will receive money for their services or goods without the actual transfer of cash.Without these necessary requirement in place that protect both the payor and payee of a negotiable instrument, our economy would not be able to function the way that it currently does.

HOLDER IN DUE COURSE

A Holder in Due Course is anyone who accepts a check for payment. CASE ON THIS

ROBERT J. TRIFFIN v. CIGNA INSURANCE COMPANY

Issue: Placing a Stop Payment DOES NOT eliminate your obligation to pay the check

In July 1993, Cigna Insurance issued James Mills a Worker’s Compensation check for $484. Mills falsely claimed he did not

receive it due to an address change, and requested a replacement. Cigna placed a stop payment on the initial check and issued a new check. Mills nevertheless cashed the first check at Sun’s Market, and Sun presented the check for payment through its bank. Cigna’s bank dishonored the check, stamped it with “Stop Payment,” and returned the check to Sun’s bank. Had Sun’s Market filed a claim against Cigna as the issuer of the check, Sun would have been entitled to be paid because of its status as a Holder in Due Course. However, Sun either did not know about the law or chose not to pursue it, because it merely tacked the check up on its bulletin board. Robert J. Triffin obtained the check from Sun’s Market, became the new HIDC, and filed this lawsuit against Cigna in August 1995, over two years after the check was returned unpaid. The Court ultimately ruled in favor of Robert Triffin, and Cigna had to pay him $484, plus interest.the above case clearly illustrates what a Holder in Due Course is, the case does not deal with check security features, or the lack thereof. The two cases on the following pages do.