20-24 Negotiable Instruments Flashcards
Unauthorized change or completion of negotiable instrument to modify obligation of a party
Alteration
Liability without conditions for commercial paper that is due
Primary liability
Liability for a negotiable instrument that has been presented, dishonored, and notice of dishonor given
Secondary liability
Demand for acceptance or payment of commercial paper
Presentment
When a presentment is made, but acceptance or payment not yet made
Dishonor
The drawee bank
Payor bank
Not all payments on instrument fully made and not all made by due date
Uncured default
Holder subsequent to holder in due course
Holder through a holder in due course
Rule giving rights of holder in due course
Shelter principle
Certification of notice of dishonor by authorized official
Protest
Goods or services primarily for personal, family, or household use
Consumer goods or services
Claim by the party being sued against the party suing
Setoff
Defense that cannot be used against a holder in due course
Limited or personal defense
Defense against any holder
Universal or real defense
The act of transferring ownership of negotiable instrument, by indorsement, delivery, or physical transfer
Negotiation
Signature or statement of purpose by the owner, signature of the payee or other holder, placed on the back of a negotiable instrument that indicates future control of instrument
Indorsement
Left side of front of check
Trailing edge
Paper so firmly attached to an instrument as to become part of it
Allonge
- the handwritten signature of the payee on the back of a check
- indorsement that does not state to whom the instrument is to be paid
- having no words other than the signature of the indorser
Blank indorsement
An indorsement which designates the particular person to whom payment is to be made
Special indorsement
An indorsement which limits the liability of the indorser
Qualified indorsement
An indorsement which prevents / limits the use of the funds for anything except the stated purpose
“For Deposit Only”
Restrictive indorsement
Bank receiving check for deposit
Depository bank
Act indicating intention to destroy the validity of an instrument
Cancellation
Unilateral act of holder giving up rights in the instrument or against a party to it
Renunciation
An order by a depositor requesting a bank not to pay on a check previously issued
Stop payment order
Check presented more than 6 months after its date
Stale check
Check which has been paid by the bank and returned to the drawer for record-keeping
Canceled check
Check the drawee bank refuses to pay for reasons such as insufficient funds or closed accounts
Bad check
A check not paid by the bank when properly presented
Dishonored check
Check drawn prior to its date
Postdated check
Pre-printed instrument in fixed amount requiring signature and countersignature
Traveler’s check
Check with voucher attached
Voucher check
- an order by a depositor on the bank to pay a sum of money to a payee
- draft drawn on a bank and payable on demand
- piece of commercial paper drawn on funds in a bank account and payable on demand
Check
- an ordinary check which an official of the bank has accepted by writing across the face of the check the word “certified” or some similar word, and signed
- a check for which the bank assures that the drawer has sufficient funds to make payment
- a check which carries the guarantee of the bank that sufficient funds are available to pay the check when it is presented
Certified check
A check draw on a bank’s own funds and signed by a responsible bank official or cashier
Cashier’s check
- check drawn by one bank on another bank in which it has funds on deposit
Bank draft (teller’s check)
Sealed, written contract obligation with essentials of note
Bond
Bond with detachable individual coupons representing interest payments
Coupon bond
Bond payable to specific person, whose name is recorded by issuer
Registered bond
Note secured by personal property
Collateral note
Note secured by mortgage on real estate
Real estate mortgage note
Unsecured bond or note issued by a business
Debenture
Acknowledgement by bank of receipt of money with engagement to repay it with interest
Certificate of deposit (CD)
Written order signed by one person requiring the person to who addressed to pay a particular sum of money, to order or to bearer, on demand or at a certain time
Drafts
Draft drawn in one state an payable in the same or another state
Inland draft
Draft payable upon presentation of draft’s holder
Sight draft
Draft payable a certain number of days or months after date or presentation
Time draft
Drawee’s signed agreement to pay draft
Acceptance
Draft drawn by seller on purchaser of goods and accepted by purchaser
Trade acceptance
Instrument issued by business indicating payee may receive financial instrument’s indicated amount
Money order
Transferability
Negotiability
First delivery of negotiable instrument by maker or drawer to give rights to another
Issue
Intentional transfer of possession and control of something
Delivery
EFTs begun at retailers when customers pay for goods or services
Point of sale system (POS)
Automatic deposit of funds to an account
Preauthorized credit
EFT terminal that performs routine banking services
Automated teller machine (ATM)
-document of payment, such as a check
- a writing drawn in a special form which can be transferred from person to person as a substitute for money or as an instrument of credit
Commercial paper
Negotiable instrument
Rules applied by courts set up by merchants in early England, prior to 1400
Law merchant
The act of transferring ownership of negotiable instrument to another party
Negotiation
- a person in possession of a NI who accepts the NI in good faith and for value
- person who acquires rights superior to original owner
- holder for value and in good faith with no knowledge of dishonor, defenses, or claims
Holder in due course
Commercial paper made payable “to the order of” some named party
Order paper
Commercial paper payable to any person in possession of it, the bearer
Bearer paper
Written order by one person direction another person to pay a sum of money to a third person
Draft (bill of exchange)
- NI containing a promise to pay
- an unconditional promise in writing made by one party to another, signed by the maker, engaging to pay on demand or at a particular time, a particular sum of money to order or to bearer
Promissory note
The party to whom any NI is made payable
Payee
- the person who executes any draft
- a personal (depositor) who signs a check, ordering a payment to be made
Drawer
The person, company, or financial institution ordered to make a payment on a check or draft
Drawee
Person who agrees to pay a draft, receive goods, or assent to an order
Acceptor
Automatic deduction of bill payment from checking account
Pre authorized debit
Shortening a check’s trip from the payee to the drawee bank and then the drawer
Check truncation
Fund transfer initiated electronically, telephonically, or by computer
Electronic funds transfer (EFT)
Person who executes, signs, or promises to pay on a promissory note
Maker
- person in possession of a NI
- payee of an instrument made payable to whoever is in possession of the instrument
Bearer
- person in possession of instrument payable to bearer
- person in possession of a delivered NI
Holder
- payee of note or draft transferring the instrument to another party
- person who indorses a NI
- person whose name is written on the back of an NI
Indorser
- named holder of indorsed NI
- person who becomes the holder of a NI by indorsement which names him/her as the person to whom the instrument is negotiated
Indorsee
