Which liability category corresponds to "Properly payable" in the instrument liability framework?

• A. Obligation on the instrument
• B. Properly payable
• C. Final payment / payment by mistake
• D. Warranty liability (Transfer and Presentment)

Answer: (B)

In this framework, liability for negotiable instruments is split into distinct categories that reflect who bears risk as the instrument is processed. The term “properly payable” specifically describes the drawee bank’s liability status when it pays an instrument in proper form. When a payment is properly payable, the bank has discharged its duty by honoring the item according to the presentment and terms, and it isn’t liable beyond the amount paid. This category sits between the maker’s or drawer’s underlying obligation on the instrument and other liability concepts like final payment or payment-by-mistake, as well as the transfer and presentment warranties. So the label properly payable is the exact designation for the bank’s liability situation after honoring a correctly presented instrument.