Basic Definitions for Negotiable Instruments

Question 1

Writing

Answer 1

A writing is any reduction to tangible form

Question 2

Signature

Answer 2

A signature can be any mark adopted with the present intent to authenticate a writing.

Question 3

Money

Answer 3

Money means any currency adopted by a government.

Question 4

Bearer Paper

Answer 4

Bearer paper is payable to whomever is in possession of the instrument. An instrument is payable to bearer if it does not have a payee.

Question 5

Instrument

Answer 5

An instrument is payable at a definite time, or on demand

Question 6

Instruments Additional Undertakings

Answer 6

An instrument can not state any additional undertakings , in addition to the payment of money. You may use collateral to protect the instrument.

Question 7

Drafts

Answer 7

A draft always requires three parties. (bank, check,payee)

Question 8

Drawer

Answer 8

Party who orders another party. (Issuing check Name, creator of draft or paper)

Question 9

Drawee

Answer 9

A drawee is a third party who will pay the drawers request. (Bank)

Question 10

Payee

Answer 10

Payee is person who is issued ordered paper (check, note)

Question 11

Check

Answer 11

Checks always payable on demand.

Question 12

Issue

Answer 12

An issue is the first delivery of an instrument.

Question 13

Negotiation

Answer 13

A negotiation is the transfer of an instrument. (transferee is now the holder)

Question 14

Holder

Answer 14

A person in possession of bearer paper, A person named as a payee in order paper.

Question 15

Transfer

Answer 15

Physical transfer of an instrument

Question 16

Payor Bank

Answer 16

Bank in whack check comes from

Question 17

Depository Bank

Answer 17

Bank in which check is FIRST deposited into.

Question 18

Bearer paper

Answer 18

Blank endorsement, endorsed check no special indorsements.

Question 19

Order paper

Answer 19

Specified payee or Holder

Question 20

Negotiated Checks

Answer 20

1 Payee= 1 endorsement; 1 AND 1 requires both endorsements; 1 OR 1 only requires 1 endorsement. Same rule apples for stacked payees