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22 Cards in this Set
- Front
- Back
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commercial paper
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paper that is set up for future payment of $
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2 types of commercial paper
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1) note
2) draft |
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Note
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-2 party instrument - maker & payee
"promise to pay" (i.e. promissory note, CD by bank Pay to order of - payee Maker - primarily liable drawer (bank) - secondarily liable |
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draft
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-3 party instrument -orders another to pay $
-"order to pay" -drawer (I) /drawee (bank) /payee drawee (bank) - primarily liable drawer - secondarily liable |
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examples of draft
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1) check - drawn by bank -demand paper thus payable immediately
2) trade acceptance - drawn by seller (drawer) on the buyer (drawee) that is payable to the seller at future date (i.e. delivery of goods) |
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Is instrument Negotiable?
Can it be transferred from one party to another where the transferee is protected against claims made by the creator to avoid payment |
COUPONS - need all 6 req's
-Certain Sum of $$ -Order or bearer -Unconditional promise to pay -Payment in $$, not in goods or services -ON demand, or specific time -Signed by maker of note/drawer of draft -If it's a check - "pay to" & possession |
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negotiation
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the transferee gets the same rights as the previous transferor
-holder -holder in due course -shelter provision: holder through holder in due course |
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assignment
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transfer of non-negotiable instrument
-transferee gets rights |
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assignment
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transfer of non-negotiable instrument
-transferee gets rights |
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non-negotiable instrument
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11/1/09
pay Ariel Painter on 12/1/09 $1000 signed homeowner -not payable to order or to bearer |
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negotiating order paper
negotiating bearer paper |
-delivery only
-delivery & endorsement by transferor delivery = holder gets possession |
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how do you make the paper
bearer paper? |
endorse in blank (does not specify the endorsee)
-once it becomes bearer paper, you don't need to endorse it to negotiate it to the next party |
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blank endorsement
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-check made to order of Me (on front)
Me signing name (on back) -converts order paper into bearer paper -bearer paper can be negotiated through delivery (I lose the check, C picks it up and gives it to D, D is valid holder and C's endorsement is not required) |
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special endorsement
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-on back of check payable to Me,
I sign - pay to Mr. Smith -"pay to order of"- on back not required -bearer paper into order paper |
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restrictive endorsement
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1) "for deposit only" signed Me
2) pay to X only if X fixes my car (condition on back is ok) |
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qualified endorsement
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-"without recourse" signed Me
-I am disclaiming liability to pay holder or any subsequent endorser |
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special qualified endorsement
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pay to S without recourse, signed Me
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blank qualified endorsement
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without recourse, signed Me
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restrictive, qualified, blank
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for deposit only, without recourse, signed M
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restrictive, qualified, special
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pay to X, if she completes the work, without recourse, signed Me
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holder in due course
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-entitled to payment on negotiable instrument
requiremnts: 1) be a holder 2) give value 3) take in good faith 4) without notice that it is dishonoured, or that a person has a claim to it, or overdue |
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rights of a holder in due course
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-takes free of all PERSONAL DEFENSES
-breach of K - HDC still has right to collect D negotiates a note to M for payment of computer. M negotiates it to Me (i qualify as HDC) D says that M breaches the K by not delivering computer but I can still collect $, D has to seek recourse against M |
