big ole deck Flashcards
What is a note?
A written promise to pay.
If a note is created by a bank, what is it called?
a “certificate of deposit”
What is a draft?
A written order by one person to another, directing the latter to pay money to a third person
- a check
Types of negotiable instruments?
A note and a draft
Who is a drawer?
A person who signs or is identified in a draft as a person ordering payment.
- bank’s customer
Who is a drawee?
A person ordered in a draft to make a payment
- the bank
Who is the payee?
The person the check is written out to
- who the bank pays
“Good faith”
means honesty in fact and the observance of reasonable commercial standards of fair dealing
Who is a maker?
A person who signs or is identified in a note as a person undertaking to pay.
Who is a remitter?
A person who purchases an instrument from its issuer if the instrument is payable to an identified person other than the purchaser.
What is a negotiable instrument?
An unconditional promise or order to pay a fixed amount of money, provided the instrument meets certain conditions
7 criteria for a negotiable instrument
- must be payable to bearer or to order
- is payable on demand or at a definite time
- in writing
- signed
- contain an unconditional promise or order
- no other undertakings other than promise to pay
- for fixed sum of money
3-103(a)(3) states a negotiable instrument cannot state any other undertaking or instruction
what are the three exceptions?
- an undertaking or power to give, maintain, or protect collateral to secure payment
- an authorization or power to the holder to confess judgment or realize on or dispose of collateral
- a waiver of the benefit of any law intended for the advantage or protection of an obligor
If an instrument falls within the definition of both a “note” and a “draft”, what happens?
The person entitled to enforce the instrument may treat it as both
3-104(e)
“Issue”
the first delivery of an instrument by the maker or drawer, whether to a holder or non holder, for the purpose of giving rights on the instrument to any person
3-105(a)
Is nonissuance a defense?
Yes, 3-105(b)
A promise or order is unconditional unless what 3 things?
- an expressed condition to payment
- that the promise or order is subject to or governed by another record
- that rights or obligations with respect to the promise or order are stated in another record
3-106(a)
Does a reference to another record itself make the promise or order conditional?
No
3-106(a)
Texas millionaire Howard Chaps signs all of his checks with a small branding iron that prints a fancy “X” on the signature line. Are his checks negotiable?
Yes
1-201(37); Official Comment 39
Walter Capitalists is the sole proprietor of the Capitalist Company.
yes
“Drawee”
a person ordered in a draft to make payment
“Drawer”
a person who signs or is identified in a draft as a person ordering payment
“Maker”
a person who signs or is identified in a note as a person undertaking to pay
“Order”
a written instruction to pay money signed by the person giving instruction
the instruction may be addressed to to any person, including the person giving the instruction, or to one or more persons jointly or in the alternative but not in succession
“Promise”
a written undertaking to pay money signed by the person undertaking to pay.
an acknowledgement of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation
Requirements for HDC
- takes instrument for value
- in good faith
- without notice that it is overdue or has been dishonored or is subject to claims or defenses against it
Requirements for Holder
- Proper indoresment
2. Possession
If the instrument shows signs of forgery or alteration, can a person still become a HDC
No
3-302(a)(1)
Can a person achieve HDC status after only partially performs promise on the instrument?
the holder may assert rights as a HDC only to the fraction of the amount payable under the instrument equal to the value of the partial performance divided by the value of the promised performance
Teresa agrees to pay Harold $8,000 for a note payable for $10,000. However, she has only paid $4,000 and then subsequently learns that seller breached the contract.
What is the extent of Teresa’s HDC rights?
$5,000
because Teresa has paid only half of the agreed upon consideration and this is only a HDC for one-half of the note’s face value.
