Ny Commercial Paper

Front 1

Define commercial paper.

Back 1

A writing calling for the payment of money.

Front 2

Define promissory note.

Back 2

A promise maker that contains a promise to pay, not a mere IOU

Front 3

Define a draft

Back 3

Its like a commander giving a command (usually a check).

1. Drawer - gives the order

2. Drawee - ordered to pay

3. Payee - beneficiary of payment

Front 4

What are the elements of a valid negotiable instrument (as opposed to a mere contract)? (WOSSUP)

Back 4

1. A writing

2. Payable to order or bearer

3. Signed by maker or drawer

4. Reciting a sum certain

5. Containing an unconditional promise or order and no additional promises

6. Payable on demand or at a definite time

7. Payable in Currency

Front 5

What language usually indicates a contract as opposed to a negotiable instrument?

Back 5

Conditional language

Front 6

Who are the parties to a promisory note?

Back 6

Promisor - maker

Promisee - Payee

Front 7

What is contract or signature liability?

Back 7

D is sued because he signed the instrument and now refuses to pay.

Front 8

When does a maker become a proper D under a contract liability suit?

Back 8

When he signs the promisorry note he promises to pay.

Front 9

When does an indorcer become a proper D under a contract liability suit?

Back 9

When he signs the back of the check he is promising that if the check bounces, he will pay.

Front 10

When does the drawer (check signer) become a proper D under a contract liability suit?

Back 10

When the drawer signs the check he is promising that if the check bounces and he is notified, he will pay.

Front 11

When does a drawee become a proper D under a contract liability suit?

Back 11

Typically this is a bank and since they don't sign, they are not promising anything.

Front 12

What does the term "without recourse" on a negotiable instrument mean?

Back 12

Means that the person transferring title to the check/draft assumes no signature/contract liability

Front 13

What is warranty/transfer liability?

Back 13

Seller's liability for transferring a defective instrument.

Front 14

Who is a proper defendant for a warranty/transfer liability suit?

Back 14

Any person who transferred the defective instrument.

Front 15

Who is a proper plaintiff in a warranty/transfer liability suit?

Back 15

1. D endorsed - anyone who received bc warranty runs with the instrument

2. D did not endorse - only D's immediate transferee

Front 16

What 4 warranties are made by the defendant when he transfers title to a negotiable instrument? PAIN

Back 16

1. Plaintiff has good title to instrument

2. All signatures are genuine and authorized (forgery is breach)

3. Instrument has not been materially altered (tampered with)

4. No knowledge of bankruptcy or insolvency of maker/drawer

Front 17

When has there been due negotiation of a negotiated instrument?

Back 17

If there has been proper transfer of the instrument.

Front 18

If the instrument has been properly transferred then the holder may be eligible to be a _________ but if not then he transferee is not __________

Back 18

1. Holder in due course

2. Not a holder at all

Front 19

An negotiated instrument is payable to order when ___________.

Back 19

its payable to a specific payee.

Front 20

When is a negotiable instrument "payable to order" duly negotiated?

Back 20

When its delivered to the payee

Front 21

Any negotiation of a negotiable instrument payable to order beyond delivery to the payee requires ________.

Back 21

Endorsement by the payee. This is not the case when the instrument is "payable to bearer"

Front 22

What is a special endorsement?

Back 22

Names particular person as endorsee

Front 23

What is a blank endorsement?

Back 23

Does not name any one particularly as endorsee and may be negotiated by delivery alone

Front 24

What is a restrictive endorsement?

Back 24

Contains conditions

Front 25

A holder in due course takes the instrument __________

Back 25

1. For value

2. In good faith (subjective)

3. Without notice that it is overdue, has been dishonored, or is subject to any claim or defense.

Front 26

When has a holder in due course given value for an instrument?

Back 26

Must be actual value not a mere promise (i.e. consideration)

Front 27

What is the test for whether a potential holder in due course took the instrument on notice?

Back 27

Objective test of whether the HDC knew or had reason to know that the negotiable instrument was burdened.

Front 28

The Shelter rule applies to a holder in due course, T/F?

Back 28

True

Front 29

Any negotiation of a negotiable instrument payable to order beyond delivery to the payee requires ________.

Back 29

Endorsement by the payee. This is not the case when the instrument is "payable to bearer"

Front 30

What is a special endorsement?

Back 30

Names particular person as endorsee

Front 31

What is a blank endorsement?

Back 31

Does not name any one particularly as endorsee and may be negotiated by delivery alone

Front 32

What is a restrictive endorsement?

Back 32

Contains conditions

Front 33

A holder in due course takes the instrument __________

Back 33

1. For value

2. In good faith (subjective)

3. Without notice that it is overdue, has been dishonored, or is subject to any claim or defense.

Front 34

When has a holder in due course given value for an instrument?

Back 34

Must be actual value not a mere promise (i.e. consideration)

Front 35

What is the test for whether a potential holder in due course took the instrument on notice?

Back 35

Objective test of whether the HDC knew or had reason to know that the negotiable instrument was burdened.

Front 36

The Shelter rule applies to a holder in due course, T/F?

Back 36

True

Front 37

A holder in due course takes free from any ________ defenses but subject to all _________ defenses.

Back 37

1. Personal defenses

2. Subject to all real defenses

Front 38

What is a cashiers check?

Back 38

It is a draft drawn from a bank where the bank is also the drawer

Front 39

Must a bank honor a stop payment order on a cashiers check?

Back 39

No.