Book Opener

Liabilities of Partiesl How to explainprimary liability andname the partieswho are primarilyliable on negotiableinstrumentsl How to explainsecondary liability andname the parties whoare secondarily liableon negotiableinstrumentsKnowing about theliability of parties willmake you better able totackle problems withnegotiable instruments.l primary liabilityl secondary liabilityl presentmentl dishonorLiability of PartiesLiability refers primarily to responsibility for paying the instrument.The UCC divides the liability of the parties into two groups: primaryliability and secondary liability.Primary LiabilityPrimary liability is an absolute liability to pay. A party with primaryliability has promised to pay the instrument without reservations ofany kind. Two parties have primary liability: the maker of a note and theacceptor, if any, of a draft. Each of these parties has personally promisedto pay the obligation represented by the instrument without reservation.When there are comakers on notes, they have primary liability and areconsidered makers, regardless of whether they receive any consideration.SecondaryLiabilitySecondary liabilityis a liability to pay onlyafter certain conditionshave been met. Two typesof parties are secondarilyliable on negotiable instruments:the drawer of a draftand the indorsers of eitherSECONDARY LIABILITYThe drawer of a draft andindorsers of either a note or adraft are secondarily liable onnegotiable instruments. Whatdoes secondary liability mean?568 Unit 5: Using Your Purchasing Power