The Underlying Transaction | Liability on the Instrument | Negotiable Instruments

This is the first of a handful of lessons addressing liability on the instrument. In this lesson, we consider what effect issuance of a note or a check has on the underlying contract obligations. The basics are fairly straightforward but there are some nuances that warrant your careful attention. I hope you find the lesson helpful. A follow up lesson delving into the details of what parties are liable on an instrument and to what extent are they liable will be coming shortly. Chapters 00:00 - Introduction 01:15 - (1) Relationship of the Instrument to the Underlying Obligation 01:38 - Example One - basic interaction with ordinary check and contract 08:33 - Example Two - ordinary check negotiated to third party and then dishonored 14:36 - Example Three - ordinary check lost or stolen 18:41 - Example Four - effect of cashier's check vs. ordinary check 22:49 - Example Five - ordinary check gets lost in the mail 25:17 - Example Six - similar to Example Two except the ordinary check is paid out by the drawee bank rather than dishonored 30:10 - Example Seven - effect of a promissory note (instead of a check) on the underlying transaction 35:07 - (2) "Payment in Full" Checks 39:18 - Three basic requirements 42:07 - Some nuances of the rules 46:09 - Conclusion/Outro