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 promisjory 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

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Identifying the Facts and Issues

A select answer $-$ is an example of commercial paper that is a

loan of money to be payable at a future date. A select answer is an example of commercial paper that orders someone else to pay money on their behalf. A$($n$)$ select answer is a common type of draft.

When a draft is in the form of a check, $a(n)$ is typically the entity that pays the money on the check writer's behalf. The person that writes the check is also known as the $$ of the draft. A person who has select answer

$$ liability on an instrument is liable unconditionally. A person who has select answer $q,$ liability on an instrument has conditional liability.

Abigail is the

select answer

$$ of the note to Jackson. Catalina is