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Definition
| An unconditional written order that involves 3 parties. The party creating the draft (drawer) orders another party (drawee) to pay money, usually to a third party (payee). Ex. check |
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Definition
| Frequently used in the sale of goods, the seller of the goods is both the drawer and the payee |
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| What kind of instruments are checks? |
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Definition
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Definition
| the type of note issued when a party deposits funds with a bank, and the bank promises to repay the funds, with interest, on a certain date. |
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| The 6 requirements for Negotiability |
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Definition
1. Be in writing
2. Be signed by the maker or the drawee
3. Be an unconditional promise or order to pay
4. State a fixed amount of money
5. Be payable on demand or at a definite time
6. Be payable to order or to bearer, unless it is a check |
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Term
| Difference between an express promise & an order to pay |
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Definition
Express: "To be paid on demand" or "due on demand"
Order- directs a third party to pay the instrument as drawn ex. a check "pay to the order of" |
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Term
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Definition
| a drawee who has accepted, or agreed to pay, an instrument when it is presented later for payment |
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Definition
| an instrument that does not designate a specific payee |
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Definition
| contains the signature of the indorser and identifies the person to whom the indorser intends to make the instrument payable |
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Definition
An indorser who does not wish to be liable incase the check is faulty uses a ______ to disclaim this liability. Ex. Pay to Alli Jong,
without recourse
My Signature |
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Term
| Special vs. Blank Qualified Indorsements |
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Definition
_____: requires indorsement, plus delivery, for negotiation
_____: only delivery is required for negotiation & makes the instrument a bearer instrument |
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Term
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Definition
| requires the indorsee to comply with certain instructions regarding the funds involved but does not prohibit further negotiation of the instruments ex. for deposit only Signature or for collection only, signature |
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Term
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Definition
| a ___ can normally acquire a higher level of immunity than can an ordinary holder in regard to defenses against payment on the instrument or ownership claims to the instrument by other parties |
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Term
| Requirements for HDC status |
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Definition
| must have taken the instrument (1) for value, (2) in good faith, (3) without notice that it is defective(ex. overdue, dishonored, irregular or incomplete) |
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Term
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Definition
| Purchased at judicial sale, acquired as a result of taking over a trust or eastate, or as part of a corporate purchase of assets will have the rights of an _____. |
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Definition
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Definition
| A person who transfers a note or a draft by signing it and delivering it to another person is the ___ |
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Definition
| The person to whom the check is indorsed and delivered is the ____ |
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Term
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Definition
The purpose of this principal extends the benefits of HDC status and is designed to aid the HDC in readily disposing of the instruments.
By extending the HDC benefits, this principal promotes MARKETABILITY and FREE TRANSFERABILITY of negotiable instruments |
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Term
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Definition
| one who by his personal appearance or use of mail, internet, etc, induces a maker or drawer to issue an instrument in the name of the impersonated payee. |
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Definition
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Definition
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| Parties who are secondarily liable promise to pay only if what occurs? |
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Definition
(1) The instrument is properly & timely presented
(2) The instrument is dishonored
(3) Timely notice of dishonor is given |
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Definition
| ___ is one who signs an instrument for the purpose of lending his or her name as credit to another party on the instrument |
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Term
| Universal Defenses are valid... |
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Definition
| valid against all holders even HDC |
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Term
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Definition
1. Forgery
2.Fraud in the execution
3.Material Alteration
4.Discharge in bankruptcy
5.Minority, if the contract is voidable
6.Illegality, mental incapacity, or duress, if the contract is void under state law |
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Term
| Personal (Limited) Defenses: Used to avoid pmt to an ordinary holder, but not HDC |
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Definition
1.Breach of Contract
2.Lack or failure of consideration
3.Fraud in the inducement (ordinary fraud)
4.Illegality, mental incapacity, or duress, if the contract is voidable
5.Previous pmt or cancellation of the instrument
6.Unauthorized completion of an incomplete instrument and nondelivery of the instrument |
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