This is “Liability and Discharge”, chapter 19 from the book The Legal Environment and Business Law: Master of Accountancy Edition (v. 1.0).
This book is licensed under a Creative Commons by-nc-sa 3.0 license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms.
This content was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz in an effort to preserve the availability of this book.
Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page.
For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. You may also download a PDF copy of this book (14 MB) or just this chapter (377 KB), suitable for printing or most e-readers, or a .zip file containing this book's HTML files (for use in a web browser offline).
After reading this chapter, you should understand the following:
In Chapter 16 "Nature and Form of Commercial Paper", Chapter 17 "Negotiation of Commercial Paper", and Chapter 18 "Holder in Due Course and Defenses", we focused on the methods and consequences of negotiating commercial paper when all the proper steps are followed. For example, a maker gives a negotiable note to a payee, who properly negotiates the paper to a third-party holder in due course. As a result, this third party is entitled to collect from the maker, unless the latter has a real defense.
In this chapter, we begin by examining a question especially important to management: personal liability for signing company notes and checks. Then we look at the two general types of liability—contract and warranty—introduced in Chapter 17 "Negotiation of Commercial Paper". We conclude the chapter by reviewing the ways in which parties are discharged from liability.