Case Problem Analysis: Liability for Negotiable Instruments

Abigail is in the business of selling fine antiques. Abigail purchased an antique desk for $$5,000$ from Jackson, and gave a promissory note for payment. Concerned that Jackson might not accept the note, Abigail had her friend Catalina sign the promissory note as well. Jackson accepted the note as payment. Two weeks later, Jackson sought payment on the note. Abigail told Jackson that she is not responsible for the promissory note because Catalina signed the note too, and Jackson had to seek payment from Catalina first.

Abigail also spotted a beautiful set of vintage chairs owned by Max that would be perfect for her store. Abigail wrote a $$10,000$ check, also signed by her business associate Orville as an accommodation party, to Max to pay for the chairs. Max presented the check to Westville Savings, the bank where Abigail has a checking account, for payment. Westville Savings dishonored the check claiming Abigail had insufficient funds. Who is liable for these negotiable instruments?

Apply It: Liability for Negotiable Instruments

Total points: $--/25$

Attempts left: $1$

Abigail is the

maker $q,$ of the note to Jackson. Catalina is the co$-$maker

$q,$ of the note to Jackson. When Abigail and Catalina signed the note, they are jointly and severally $-$ liable to Jackson.

If Jackson chooses, he can demand full payment from Catalina before or after $q,$ demanding full payment from Abigail. If Catalina pays the $$5,000$ owed to Jackson on the note, Catalina can demand full reimbursement $-$ from Abigail. However, if Abigail does not pay Catalina, Jackson is not liable $$ to Catalina to return the money.

When Abigail wrote a $$10,000$ check to Max, she was the drawer $$ of the check. As an accommodation party, Orville has select answer