2015 - Mee - Commercial Paper - Negotiable Instruments (Generally)

Front 1

What is the definition of commercial paper?

Back 1

pieces of paper that direct money from one person to another

Front 2

What are the two types of Commercial Paper?

Back 2

1. Order (check)
   
2. Promise (note)
   

Front 3

What is an Order?

Back 3

• A Check
  
• where account holder/payor orders bank/drawee to pay money to payee

Front 4

What is a Promise?

Back 4

• A Note
• Maker promises payment to payee

Front 5

What are the eight requirements for a Negotiable Instrument?

Back 5

1. Unconditional
2. Written/Signed order or promise
3. To transfer Money
4. Fixed Amount
5. Words of Negotiability
6. Definite time for payment (or bearer)
   
7. No Extraneous Undertakings
8. Can't state "non-negotiable"
   

Front 6

What is the Unconditional requirement of Negotiable Instrument?

Back 6

• Cannot have any conditions,
  

• But note can:

(i) refer to accompanying loan/security agreement, or

(ii) limit payment to particular source

Front 7

What is the Fixed Amount requirement of Negotiable Instrument?

Back 7

Must be a definite amount (formulas are ok)

Front 8

What is the Words of Negotiability requirement of Negotiable Instrument?

Back 8

"Magic Words" necessary

• Bearer or Order words
  

Front 9

What are the two types of Words of Negotiability?

Back 9

1. Bearer paper
   
2. Order paper
   

Front 10

What are the two Bearer Words of Negotiability?

Back 10

1. “to bearer”, or
   
2. blank or “cash”

Front 11

What are the two Order Words of Negotiability?

Back 11

1. “to the order of” specific person, or
   
2. specific person “or order”

Front 12

What is the Definite Time for Payment requirement of Negotiable Instrument?

Back 12

• Must be specific time, or upon demand
• Note that prepayment and acceleration are ok
  

Front 13

What is the No Extraneous Undertaking requirement of Negotiable Instrument?

Back 13

no additional promises or orders to do anything other than paying money

Front 14

What are the three exceptions to the No Extraneous Undertakings requirement?

Back 14

1. give/maintain/protect collateral,
   
2. allow holder to confess judgment or dispose of collateral, or
   
3. waive protections for maker/indorser

Front 15

Who are the three parties to an Order?

Back 15

1. Drawer (account holder)
2. Drawee/Payor (Bank)
3. Payee (third person)
   

Front 16

Who is the Drawer?

Back 16

Person making the check - the account holder

Front 17

Who is the Drawee/Payor?

Back 17

The person being ordered to pay - the bank

Front 18

Who is the Payee?

Back 18

The person accepting the check - 3rd party

Front 19

Who are the two parties to a Promise?

Back 19

1. Promisor - Person making the note
2. Payee - Person taking the note and who is going to get paid