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62 Cards in this Set
- Front
- Back
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A ________ is a written promise to pay money.
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Note
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What is a Note?
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A written promise to pay money.
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If a note is created by a bank, it is called a _____________.
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Certificate of Deposit (CD)
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What is a CD?
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A note created by a bank.
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A ______ is a written order by one person to another directing the latter to pay money to a third person.
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Draft
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What is a Draft?
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a written order by one person to another directing the latter to pay money to a third person
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Who/what is a drawer?
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The person who orders a draft.
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Who orders a draft?
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a drawer
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Is a checking account a draft or a note?
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draft.
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What is a cashiers check
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a check drawn by the bank on itself.
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A __________ is a check drawn on the bank by itself.
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a cashiers check.
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what is a tellers check?
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One bank drawing a draft on another or making the draft 'payable through' another bank.
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If one buys a non negotiable instrument, what technically occurs?
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an assignment of a contract right subject to all defenses arising from the transaction.
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what are the requirements for negotiability?
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1. Writing
2. Signed 3. Unconditional Promise or Order 4. Fixed Amount of Money 5. Payable on Demand or at a Definite Time. |
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Can a negotiable instrument be oral?
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No, it must be in writing (3-103(a))
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Must a negotiable instrument be written on a piece of paper?
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No, while the instrument must be in writing there is no requirement that it be written on paper.
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is the following note negotiable?
"I promise to pay $800 to the order of Music Hall, only if the theater does not burn down before I use it." |
No, this is an express condition. If the condition was not made expressly it would be negotiable.
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If an instrument mentions the details of the underlying contract does that destroy negotiability?
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No, as long as payment of the note is not made "subject to" the performance of that contract.
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is the following instrument negotiable?
"I promise to pay 100 bales of cotton to bearer" |
No, it must be a promise to pay money.
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If an instrument states it is a promise to pay 100 Euros, are $ acceptable?
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An instrument payable in foreign currency is presumed to be payable in either that currency or the US dollar equivalent unless the instrument limits payment to the stated currency.
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Is a note which does not state a date negotiable?
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Yes, the instrument is treated as being payable on demand.
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_________ is payable to the holder of the paper and not to any specific person
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Bearer Paper / Payable to Bearer
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If an instrument specifies who it is payable to it is __________.
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Order Paper
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If a note purports to charge interest is it negotiable?
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Yes. charging calculable interest does not destroy negotiability.
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In a personal check situation, who is the Drawee?
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the bank.
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In a personal check situation, who is the Drawer/Issuer?
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the 'maker' of the check
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Is a letterhead a sufficient signature for negotiability?
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No.
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May an instrument signed by a machine be negotiable?
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Yes
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May an instrument signed using another name or word be negotiable (ex. 'Father')
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Yes
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How can a promissory note involve more than 2 parties?
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when it's indorsed on the back. It then becomes bearer paper unless a special indorsement is used.
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Pay to Bearer, Pay to Order of Bearer, Pay to Cash, Pay to Order of Cash, [blank], Pay to John Doe, and Pay to Chair, are all examples of _______________.
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Bearer Paper.
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What are the legal duties of an Issuer?
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(3-412) Pay the Instrument
1. According to its terms; or 2. if incomplete, according to its terms when completed. |
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_________ is the person to whom a note is made payable to.
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Payee
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A _______ creates a draft.
A _______ creates a note. |
Drawer, Maker
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A Maker creates a ________.
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Note
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A Drawer creates a ________.
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Draft
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A _______ is to whom the drawer addresses the order of payment.
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Drawee. A bank on a check.
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______ is the person entitled to payment on a draft.
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Payee
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Negotiability refers to _______.
Negotiation refers to _______. |
Form, Transfer
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Explain the Doctrine of Derivatives
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You only get what title the previous person in possession hod.
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What are the elements of a Holder in Due Course?
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1. Holder
2. Taken for Value 3. Taken in Good Faith 4. Taken w/o notice of claims or defenses. |
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Z is a holder of bearer paper if:
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Z has possession of it.
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Z is a holder of order paper if:
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Z has possession of it and it is made out or indorsed to Z.
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Can there be a break in the chain of order paper?
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No.
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What is the effect of indorsing the back of order paper
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it becomes bearer paper.
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What are the 3 stages of a negotiable instrument?
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1. Issuance;
2. Transfer; and 3. Presentment for Payment. |
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Who ends up w/ a loss when bearer paper is lost?
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the person who lost it.
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What are the 4 elements of a Holder in Due Course
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1. Holder of a Negotiable instrument
2. Taken for Value 3. Taken in Good Faith 4. Taken w/o notice of claims or defenses. |
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Can there be a break in the chain of order paper?
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No
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Can there be a break in the chain of bearer paper?
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Yes
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Can one become a Holder in Due Course w/o first becoming a common law holder?
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No
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If physical transfer of an instrument makes the transferee a technical holder the transfer is called a __________.
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negotiation
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How is order paper negotiated?
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1. Indorsement by the proper person
2. delivery of the instrument to the transferee. |
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What is an indorsement?
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a signature placed on an instrument by the payee.
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Does bearer paper require negotiation?
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No
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What is a blank indorsement
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simply signing the back of the instrument
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What is the effect of a blank indorsement?
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creates bearer paper.
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What is a special indorsement?
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When the original payee writes "pay X" above his or her indorsement.
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What is an "Allonge"?
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a separate paper used for indorsements affixed to the instrument.
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Can order paper survive a blank indorsement?
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Yes, but not on its own. A blank indorsement creates bearer paper. A subsequent Special Indorsement can turn it into order paper again.
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A --> B --> C
A gives B order paper, B lost it, C forges Bs name... Is C a holder? |
No, following a forgery no later transferee can qualify as a holder.
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A --> B --> C --> D
A gives B order paper, B lost it, C forges Bs name, D gives value in good faith. is D a HDC? |
No, even though D gave value and had no knowledge of the break in the chain (Cs forgery of Bs indorsement) no subsequent transferee can become a holder.
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