Miscellaneous
Overview
This catch-all domain covers commercial paper, secured transactions, bankruptcy, insurance and bailments, and basic property and estate rules. The questions are usually definitional: identify the instrument, the priority, or the defense.
Negotiable instruments (UCC Article 3)
A negotiable instrument must be a writing, signed by the maker or drawer, containing an unconditional promise or order to pay a fixed sum, payable on demand or at a definite time, to order or bearer, with no unauthorized promises. A holder in due course takes for value, in good faith, and without notice of dishonor or defenses. An HDC takes free of personal defenses (breach of contract, fraud in the inducement, failure of consideration) but remains subject to real defenses (forgery, fraud in the factum, infancy, duress, bankruptcy discharge, illegality).
Secured transactions (UCC Article 9)
Attachment requires value, debtor rights in the collateral, and a security agreement. Perfection typically occurs by filing a financing statement. Priority generally goes to the first to file or perfect; a purchase-money security interest perfected within the statutory period has super-priority over a prior inventory financer.
Bankruptcy, insurance, bailments, property, wills
Chapter 7 liquidates; Chapter 11 reorganizes; Chapter 13 adjusts debts of individuals with regular income. The automatic stay stops collection actions on petition. Exceptions to discharge include fraud, certain taxes, and student loans absent hardship. Insurance requires insurable interest and good faith; indemnity limits recovery. Bailments are classified by whose sole or mutual benefit is served, and the care standard varies. Recording acts protect subsequent purchasers; fixtures pass with land; easements are nonpossessory interests. Intestacy passes property by statute; a will requires testamentary capacity, intent, and formalities.
Worked example
A consumer buys a used car with a check later dishonored, and the dealer sues. The dealer transfers the note to a finance company that takes for value and in good faith. The finance company is an HDC and takes free of the buyer's personal defense of breach of warranty, but not of forgery; if the buyer's signature was forged, the instrument is void and even an HDC cannot enforce it.
Traps
- An HDC does not defeat real defenses.
- Attachment and perfection are separate steps.
- The automatic stay does not discharge debt; discharge comes later.
- A will must be revoked by a later will, a physical act, or operation of law.