Business Law- Chapter 22

Question 1

Negotiable Instrument

Answer 1

A special form of contract that satisfies the requirements established by Article 3 of the UCC.

Question 2

Article 3 of the UCC

Answer 2

A model code that establishes rules for the creation of, transfer of, enforcement of, and liability on negotiable instruments.

Question 3

Revised Article 3

Answer 3

A comprehensive revision of the UCC law of negotiable instruments that reflects modern commercial practices.

Question 4

Draft

Answer 4

A three-party instument that is an unconditional written order by one party that orders a second party to pay money to a third party.

Question 5

Drawer of a Draft

Answer 5

The party who writes an order for a draft.

Question 6

Drawee of a Draft

Answer 6

The party who must pay the money stated in a draft.

Question 7

Payee of a Draft

Answer 7

The party who receives the money from a draft.

Question 8

Time Draft

Answer 8

A draft payable at a designated future date.

Question 9

Sight Draft

Answer 9

A draft payable on sight.

Question 10

Trade Acceptance

Answer 10

A sight draft that arises when credit is extended (by a seller to a buyer) with the sale of goods. The seller is both the drawer and the payee, and the buyer is the drawee.

Question 11

Check

Answer 11

A distinct form of draft drawn on a financial institution and payable on demand.

Question 12

Drawer of a Check

Answer 12

The checking account holder and writer of a check.

Question 13

Drawee of a check

Answer 13

The financial institution where the drawer of a check has his or her account.

Question 14

Payee of a Check

Answer 14

The party to whom a check is written.

Question 15

Promissory Note

Answer 15

A two-party negotiable instrument that is an unconditional written promise by one party to pay money to another party.

Question 16

Maker of a Note

Answer 16

The party who makes a promise to pay (borrower)

Question 17

Payee of a Note

Answer 17

The party to whom a promise to pay is made (lender)

Question 18

Time Note

Answer 18

A note payable at a specific time.

Question 19

Demand Note

Answer 19

A note payable on demand.

Question 20

Collateral

Answer 20

Security against repayment of a note that lenders sometimes require; can be a car, a house, or other property.

Question 21

Certificate of Deposit

Answer 21

A two-party negotiable instrument that is a special form of note created when a depositor deposits money at a financial institution in exchange for the institution’s promise to pay back the amount of the deposit plus an agreed-upon rate of interest upon the expiration of a set time period agreed upon by the parties.

Question 22

Maker of a CD

Answer 22

The financial institution that issues a CD (borrower)

Question 23

Payee of a CD

Answer 23

The party to whom a CD is made payable; usually the depositor (lender)

Question 24

Permanency Requirement

Answer 24

A requirement of negotiable instruments that says they must be in a permanent state, such as written on ordinary paper.

Question 25

Portability Requirement

Answer 25

A requirement which states that a negotiable instrument must be signed by the drawer or maker. Any symbol executed or adopted by a party with a present intent to authenticate a writing qualifies as her signature.

Question 26

Unconditional Promise or Order to Pay Requirement

Answer 26

A requirement that says a negotiable instrument must contain either an unconditional promise to ay (note or CD) or an unconditional order to pay (draft or check)

Question 27

Order to Pay

Answer 27

A drawer’s unconditional order to a drawee to pay a payee.

Question 28

Promise to Pay

Answer 28

A maker’s (borrower’s) unconditional and affirmative undertaking to repay a debt to a payee (lender).

Question 29

Unconditional

Answer 29

Not conditional or limited. Promises to pay and orders to pay must be unconditional in order for them to be negotiable.

Question 30

Fixed Amount of Money

Answer 30

A requirement that a negotiable instument contain a promise or an order to pay a fixed amount of money.

Question 31

Fixed Amount Requirement

Answer 31

A requirement of a negotiable instrument that ensures that the value of the instrument can be determined with certainty.

Question 32

Money

Answer 32

A “medium of exchange authorized or adopted by a domestic or foreign government”

Question 33

Payable on Demand or at a Definite Time Requirement

Answer 33

A requirement that a negotiable instrument be payable either on demand or at a definite time.

Question 34

Demand Instrument

Answer 34

An instrument payable on demand.

Question 35

TIme Instrument

Answer 35

An instrument payable at a fixed date, on or before a stated date, at a fixed period after sight, or at a time readily ascertainable when the promise or order is issued.

Question 36

Nonnegotiable Contract

Answer 36

A contract that fails to meet the requirements of a negotiable instrument and therefore is not subject to the provisions of UCC Article 3.