May 14, 2020

Negotiable Instruments

Negotiable Instruments

Forged Endorsements Under the United Nations Negotiable Instruments Convention: A Compromise Between Common and Civil Law
      Carl Felsenfeld, 45(1): 397–413 (Nov. 1989)
The Convention on International Bills of Exchange and International Promissory Notes has been adopted by the United Nations General Assembly and is on its way to the Senate for ratification as a treaty. One of the most difficult tasks faced by its draftsmen was to establish a satisfactory compromise position between the civil and common law approaches to forged endorsements. Under the former system, the forgery is effective to move the instrument; under the latter it has no validity. The Article describes the position endorsed by the United Nations and affirms that, in this respect, the Convention is satisfactory for adoption as a U.S. treaty.

Void or Voidable?—Curing Defects in Stock Issuances Under Delaware Law
     C. Stephen Bigler and Seth Barrett Tillman, 63(4): 1109-1152 (August 2008)
It is not unusual for a Delaware corporation's stock records to have omissions or procedural defects raising questions as to the valid authorization of some of the outstanding stock. Confronted with such irregularities, most corporate lawyers would likely attempt to cure the defect through board and, if necessary, stockholder ratification. However, in a number of leading cases, the Delaware Supreme Court has treated the statutory formalities for the issuance of stock as substantive prerequisites to the validity of the stock being issued, and the court has determined that failure to comply with such formalities renders the stock in question void, i.e., not curable by ratification. Unfortunately, the decisions issued by the Delaware courts have not afforded the necessary certainty to allow practitioners to decide whether a particular defect in stock issuance is a substantive defect that renders stock void or a mere technical defect that renders stock voidable. This Article analyzes the cases giving rise to this lack of clarity and proposes that the Delaware courts apply the policy underlying Article 8 of the Delaware Uniform Commercial Code to validate stock in the hands of innocent purchasers for value in determining whether stock is void or voidable.

U.C.C. Article 9, Filing-Based Priority, and Fundamental Property Principles: A Reply to Professor Plank
     Steven L. Harris and Charles W. Mooney, Jr., 69(1): 79-92 (November 2013)
Uniform Commercial Code Article 9 generally follows the common law principle that one cannot give rights in property that one does not have (nemo dat quod non habet). In many circumstances, however, the priority rules under Article 9, including its rule awarding priority to the first security interest that is perfected or as to which a financing statement has been filed, trump nemo dat and enable a debtor to grant a senior security interest in property that the debtor previously had encumbered. In this article, Professors Steven Harris and Charles Mooney argue that, properly understood, the first-to-file-or-perfect rule confers upon a debtor the power to create a security interest in accounts and other rights to payment that the debtor has already sold and in which it retains no interest. In doing so, the authors take issue with Professor Thomas Plank, whose argument to the contrary appeared in the February 2013 issue of The Business Lawyer.