A . Discuss primary liability on a note; on a check. b. What is secondary liability? What must be done before a person with secondary liability can be sued? Who has secondary liability on a note? Who has secondary liability on a check? c. How does contractual liability on the instrument differ from warranty liability?

Answer 1

a . If a person is primarily liable on a negotiable instrument then that person is absolutely required to pay the instrument, subject to certain real defenses. The maker is primarily liable on a note. A drawee who promises to pay by certifying a check, or accepting it as presented (thus becoming an acceptor), is primarily liable on a check.
b. Secondary liability is contingent liability. It does not arise unless the primarily liable party has defaulted on an instrument. A drawer is liable if the drawee dishonors the instrument. Indorsers are liable subject to the conditions of dishonor and notice of dishonor. An indorser has secondary liability on a note. The drawer and unqualified indorsers have secondary liability on a check.
c. Contractual liability is imposed on those who sign or have an agent sign an instrument, unless they disclam liability. Warranty liability is not subject to the conditions of proper presentment, dishonor, and notice of dishonor. It arises upon transfer or presentment. Warranty liability is not based on signature, but may be imposed on signers and nonsigners.