Stolen Negotiable Instrument and Holder Status

The video tutorial explains the differences between order paper and bearer paper, focusing on the implications of theft and forgery. For order paper, a valid signature is crucial for negotiation, and any forgery invalidates the document. In contrast, bearer paper does not require a signature, allowing a thief to become a holder. However, if the paper is not transferred in good faith or for value, theft can be used as a defense against payment unless the paper is in the hands of a holder in due course.

What is required for order paper to be negotiated or presented?

• A valid signature of the holder

• A stamp from the bank

• A witness signature

• A notarized document

What happens if a signature on order paper is forged?

• The person cannot become a holder in due course

• The forgery is considered valid

• The paper becomes more valuable

• The paper is automatically void

How can a recipient of stolen bearer paper become a holder in due course?

• By presenting it to a bank

• By receiving it for value and without notice of defenses

• By receiving it in bad faith

• By forging a signature

What is a personal defense against payment when paper is presented by a thief?

• The paper is not stamped

• The theft itself

• The paper is not notarized

• The paper is not signed

When is theft not a defense against payment?

• When the paper is in the hands of a holder in due course

• When the paper is unsigned

• When the paper is notarized

• When the paper is presented by a bank