17.1

Indorsements. A check drawn by David for $500 is made payable to the order of Matthew and issued to Matthew. Matthew owes his landlord $500 in rent and transfers the check to his landlord with the following indorsement: "For rent paid. [Signed] Matthew." Matthew's landlord has contracted to have Lambert do some landscaping on the property. When Lambert insists on immediate payment, the landlord transfers the check to Lambert without indorsement. Later, to pay for some palm trees purchased from Green's Nursery, Lambert transfers the check with the following indorsement: "Pay to Green's Nursery, without recourse. [Signed] Lambert." Green's Nursery sends the check to its bank indorsed "For deposit only. [Signed] Green's Nursery." (See Transfer of Instruments.)

a. Classify each of these indorsements.

b. Was the transfer from Matthew's landlord to Lambert, without indorsement, an assignment or a negotiation? Explain.

17-2.

Negotiable Instruments. Muriel Evans writes the following note on the back of an envelope: "I, Muriel Evans, promise to pay Karen Marvin or bearer $100 on demand." Is this a negotiable instrument? Discuss fully. (See Types of Instruments.)

17-3.

Signature Liability. Marion makes a promissory note payable to the order of Perry. Perry indorses the note by writing "without recourse, Perry" and transfers the note for value to Steven. Steven, in need of cash, negotiates the note to Harriet by indorsing it with the words "Pay to Harriet, [signed] Steven." On the due date, Harriet presents the note to Marion for payment, only to learn that Marion has filed for bankruptcy and will have all debts (including the note) discharged in bankruptcy. Discuss fully whether Harriet can hold Marion, Perry, or Steven liable on the note. (See Signature and Warranty Liability.)