Ch.22,24,26

Front 1

There are 5 types of promissory notes:

Back 1

Bonds
Collateral Notes
Real Estate Notes
Debenture
Certificate of Deposit

Front 2

Bonds

Back 2

A sealed written contract obligation that agrees to pay in the
future. Bonds are either Coupon Bonds (has coupons for interest
payments to the bearer) or Registered Bonds (paid to a particular
person, who is registered).

Front 3

Collateral Notes

Back 3

Secured by personal property

Front 4

Real Estate Notes

Back 4

Secured by a mortgage on the real estate itself

Front 5

Debenture

Back 5

Unsecured bond issued by a business. Basically, this is a
sealed promissory note

Front 6

Certificate of Deposit

Back 6

“an acknowledgement by a bank that a sum of
money has been received by the bank and a promise by the bank to
repay the sum of money. (usually with interest)

Front 7

Promissory Note

Back 7

is any written notice to pay money at a specified time.

Front 8

Maker

Back 8

One who signs the note and promises to pay

Front 9

Payee

Back 9

Party to whom the promise is made.

Front 10

The maker makes 3 guarantees:

Back 10

– Expressly agrees to pay the note according to its terms.
– Admits the existence of the payee.
– Warrants that the payee is competent to transfer the instrument by endorsement.

Front 11

Draft

Back 11

is an instrument by which a drawer orders a drawee to pay a sum
of money to a payee.

Front 12

Two types of Drafts:

Back 12

– Inland drafts – domestic drafts issued and payable in the U.S.
– Foreign drafts – draft issued or payable outside the U. S.

Front 13

There are two forms of drafts:

Back 13

*Sight Draft
*Time Draft

Front 14

Sight Draft

Back 14

payable upon presentation by the holder (i.e. checks and
money orders)

Front 15

Time Draft

Back 15

payable after a certain number of days or months from
when the draft was written and executed.

Front 16

Acceptance

Back 16

is a drawee’s signed agreement to pay a draft, delivered to
the holder.

Front 17

Money Order

Back 17

are instruments issued by a business indicating that the
payee may receive the indicated amount.

Front 18

There are 5 special types of checks:

Back 18

Certified Check
Cashiers Check
Bank Draft's
Voucher Check
Travelers Check

Front 19

Certified Check

Back 19

Is an ordinary check accepted by an official of the
drawee bank. “Certified” is written on it by the official. It makes the bank
liable for payment of the check.

Front 20

Cashiers Check

Back 20

A check the bank draws on its own funds and that
the cashier or other bank official signs.

Front 21

Bank Drafts

Back 21

A check drawn by one bank on another bank (banks
actually bank with other banks too). This allows them to move money
around.

Front 22

Voucher Check

Back 22

A check with a voucher attached. The voucher lists
how much of the total amount goes to each item on the voucher.

Front 23

Travelers Check

Back 23

Much like a cashier’s check except that is requires a
signature and counter signature by its purchaser at the time of purchase.

Front 24

Bad Checks

Back 24

are checks that the drawee bank refuses to pay.

Front 25

Stale Checks

Back 25

are checks that have not been cashed after six months
from it issuance.

Front 26

Duties Of The Bank

Back 26

• Confidentiality and Privacy – Bank must generally keep customer
information confidential.

Front 27

Duties Of The Bank

Back 27

• Forged Signature of Drawer – comparing signatures on negotiable
instruments.

Front 28

Duties Of The Bank

Back 28

• Refusal of Bank to Pay – The bank owes its customer (drawer) a duty to
pay checks to the extent the customer has sufficient funds.

Front 29

Duties Of The Bank

Back 29

• Stopping Payment on an instrument when requested (bank liable if it
pays the funds after the request is made.

Front 30

Payment after Depositor’s Death

Back 30

Payment of checks (up to 10 days)
after the death of the depositor or until it learns of the death.

Front 31

Bank Customer’s Responsibility

Back 31

• Examine monthly bank statements and notify the bank “with reasonable
promptness” of any forged signatures. If the customer fails to do this,
he/she may ultimately be responsible for losses.

Front 32

• There are two types of liability that one may have in connection with
a negotiable instrument.

Back 32

– Liability to pay the face amount of paper.
– Warranty Liability

Front 33

Primary Liability

Back 33

Maker of the promissory note, Drawee
(Acceptor of drafts) bank after acceptance of the check and drawee

Front 34

Secondary Liability (YOU)

Back 34

Parties involved are drawer of the draft or
check and unqualified indorser/endorser.

Front 35

A party does not have any liability unless:

Back 35

– An instrument is presented on time for payment or acceptance.
– It is dishonored
– Timely notice of dishonor is given to the party.

Front 36

Presentment

Back 36

is the demand for acceptance or payment made on the
maker, acceptor, drawee or other payor of commercial paper.

Front 37

Dishonor

Back 37

occurs when a presentment is made and a due acceptance
or payment is refused or cannot be obtained with the prescribed time.

Front 38

Notice of Dishonor

Back 38

Notice given only to drawers whose drafts are
accepted by someone other than a bank and the indorsers.

Front 39

Principal

Back 39

Owner of the business.

Front 40

Agent

Back 40

Conducts the business for them.

Front 41

Agency

Back 41

The relationship between the principal and the agent.

Front 42

Who May Act as An Agent?

Back 42

Anyone with reasonable intelligence
(competent) may serve as an agent. No minors

Front 43

Who Can Appoint An Agent?

Back 43

All people who are legally competent to
act for themselves may appoint someone to an agency relationship.

Front 44

General Agent

Back 44

Is one authorized to carry out all the principal’s
business of a particular kind or all the principal’s business at a particular
place even though not all of one kind.

Front 45

Express Authority

Back 45

Authority specifically given to an agent in the
agency agreement.

Front 46

Implied Authority

Back 46

There are
times during the agency where the agent must have the authority to do
things not expressly authorized by agreement in order to run the
business, this is

Front 47

Customary Authority

Back 47

Authority to do acts that are customarily done by
this type of agent.

Front 48

Apparent Authority

Back 48

Authority arising because a principal misleads a
third party into believing that an agent has authority to do an act.

Front 49

Special Agent

Back 49

is given a particular task or area in which to conduct
business.

Front 50

Par-value Stock

Back 50

stock with an assignment face value.

Front 51

Preferred Stock

Back 51

stock giving special advantage as to payment of dividends, upon liquidation or both.

Front 52

Promoter

Back 52

one who takes initial steps to form corporation.

Front 53

Public Corporation

Back 53

a corporation formed to carry out government functions.

Front 54

Qualified Endorsement

Back 54

an endorsement which limits the liability of the endorser.

Front 55

Ratification

Back 55

confirming an act that was executed without authority or an act which was voidable.

Front 56

Rescission

Back 56

canceling, annulling, avoiding.

Front 57

Restrictive Endorsement

Back 57

an endorsement which prevents the use of the instrument for anything expect the stated use.

Front 58

Sherman Antitrust Act

Back 58

legislation intended to promote competition among business by prohibiting restraint of trade.

Front 59

Sole Proprietorship

Back 59

A BUSINESS OWNED BY ONE PERSON.

Front 60

Special Agent

Back 60

one authorized person by the principal to execute specific acts.

Front 61

Subchapter S Corporation

Back 61

a creation of the tax codes; shareholders elect to be taxed as a partnership(no double taxation) w/o losing corporation status.

Front 62

Special Performance

Back 62

a contract remedy by which the court requires the breaching party to perform the contract.

Front 63

Treasury Stock

Back 63

stock reacquired by a corporation.

Front 64

Undue Influence

Back 64

improper influence that is asserted by one dominant person over another, without the threat or harm.

Front 65

Unenforceable Contract

Back 65

an agreement which is not in the form required by law.

Front 66

Uniform Commercial Code

Back 66

recognized as the most important statue in business law; includes provisions which regulate certain sales of goods.

Front 67

Valid Contract

Back 67

a contract which will be enforced by the court.

Front 68

Void Contract

Back 68

an agreementan agreement of no legal effect.

Front 69

Voidable Contract

Back 69

a contract that would be an enforceable agreement, good or service will conform to certain standard or will operate in a certain manner.