1a. What are drafts?

b. What are the two types of drafts? Describe and give an example of each.

2a. What is the difference between and holder and a holder in due course? Provide examples of each.

b. Which would you prefer to be and why?

3. Daniel worked as a writer in order to support himself and his wife while she earned her MBA degree. Daniels paychecks were important, as the couple had no other source of income. One day, Daniel drove to Old Faithful State Bank to deposit his paycheck. Standing at a counter, he indorsed the check with a blank indorsement and then proceeded to fill out a deposit slip. While he was completing the slip, a thief stole the check and cashed it.

a. Whose loss? Why?

b. How could the loss be avoided?

4. The following questions are based on Case 20.2 in your text - Triffin v. Pomerantz Staffing Services, 851 A.2d 100 (N.J. Super. 2004). A brief synopsis of the case is provided below. After you read the synopsis answer the questions that follow.

Facts: Friendly Check Cashing Corp. was presented with 18 counterfeit checks, in amounts ranging between $380 and $398, purporting to have been issued by defendant Pomerantz Staffing Services on its account with Bank of New York. printed on the face of each check was a warning: THE BACK OF THIS CHECK HAS HEAT-SENSITIVE INK TO CONFIRM AUTHENTICITY. Without examining the checks as suggested by this warning, Friendly cashed the checks, which the bank returned unpaid as counterfeit. Friendly assigned its rights to Triffin, who filed suit against Pomerantz. The trial court ruled in favor of Pomerantz, and Triffin appealed claiming, among other things, that he was entitled to payment as a holder in due course. The trial court ruled for Pomerantz and Triffin appealed.

Issue: Was Triffin an HDC?

Ruling: No, the trial courts ruling was affirmed. Friendlys (and Triffins as its assignee) failure to examine the checks to determine whether they had heat-sensitive ink prevented them from becoming a holder in due course because they failed to meet the without notice requirement. It was not commercially reasonable for a check checking service to not examine both sides of the check.

4a. Arent Friendly/Triffin innocent parties in this transaction? If so, why should they bear the risk that the checks were counterfeit? If not, why not?

4b. Why does the court consider it important that Friendly was a check-cashing business? Would the result be different if it was another type of business? Explain.

4c. How far should one have to go to meet the without notice requirement? What methods could be used to ensure that a business qualifies as an HDC and does not face the same fate as Friendly/Triffin?