Question

What does it mean to have primary liability on a negotiable instrument?

a) Primary liability means that as soon as a party signs the instrument as a maker or accepts the instrument as a drawee, they become unconditionally liable for payment, and they are not allowed any defense.
b) Primary liability means that a holder in due course can collect from any party who signed the instrument.
c) Primary liability means that a maker or drawer is liable for payment only until the instrument is indorsed.
d) As soon as a party signs the instrument as a maker or accepts the instrument as a drawee, they are the first to become liable for payment

Answer 1

Primary liability on a negotiable instrument signifies that the maker or acceptor has an unconditional obligation to pay the amount due without relying on any defenses that are personal to them.

Step-by-step explanation:

In the context of a negotiable instrument, having primary liability means that the party in question, typically a maker for promissory notes or an acceptor for drafts, has the principal obligation to pay the instrument when it becomes due. This is not contingent upon the default of another party or presentation of the instrument. Specifically, the correct answer to the question is a: Primary liability means that as soon as a party signs the instrument as a maker or accepts the instrument as a drawee, they become unconditionally liable for payment, and they are not allowed any defenses that are personal to themselves.