Business Law- Chapter 22 Flashcards
Negotiable Instrument
A special form of contract that satisfies the requirements established by Article 3 of the UCC.
Article 3 of the UCC
A model code that establishes rules for the creation of, transfer of, enforcement of, and liability on negotiable instruments.
Revised Article 3
A comprehensive revision of the UCC law of negotiable instruments that reflects modern commercial practices.
Draft
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.
Drawer of a Draft
The party who writes an order for a draft.
Drawee of a Draft
The party who must pay the money stated in a draft.
Payee of a Draft
The party who receives the money from a draft.
Time Draft
A draft payable at a designated future date.
Sight Draft
A draft payable on sight.
Trade Acceptance
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.
Check
A distinct form of draft drawn on a financial institution and payable on demand.
Drawer of a Check
The checking account holder and writer of a check.
Drawee of a check
The financial institution where the drawer of a check has his or her account.
Payee of a Check
The party to whom a check is written.
Promissory Note
A two-party negotiable instrument that is an unconditional written promise by one party to pay money to another party.
Maker of a Note
The party who makes a promise to pay (borrower)
Payee of a Note
The party to whom a promise to pay is made (lender)
Time Note
A note payable at a specific time.
Demand Note
A note payable on demand.
Collateral
Security against repayment of a note that lenders sometimes require; can be a car, a house, or other property.
Certificate of Deposit
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.
Maker of a CD
The financial institution that issues a CD (borrower)
Payee of a CD
The party to whom a CD is made payable; usually the depositor (lender)
Permanency Requirement
A requirement of negotiable instruments that says they must be in a permanent state, such as written on ordinary paper.
Portability Requirement
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.
Unconditional Promise or Order to Pay Requirement
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)
Order to Pay
A drawer’s unconditional order to a drawee to pay a payee.
Promise to Pay
A maker’s (borrower’s) unconditional and affirmative undertaking to repay a debt to a payee (lender).
Unconditional
Not conditional or limited. Promises to pay and orders to pay must be unconditional in order for them to be negotiable.
Fixed Amount of Money
A requirement that a negotiable instument contain a promise or an order to pay a fixed amount of money.
Fixed Amount Requirement
A requirement of a negotiable instrument that ensures that the value of the instrument can be determined with certainty.
Money
A “medium of exchange authorized or adopted by a domestic or foreign government”
Payable on Demand or at a Definite Time Requirement
A requirement that a negotiable instrument be payable either on demand or at a definite time.
Demand Instrument
An instrument payable on demand.
TIme Instrument
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.
Nonnegotiable Contract
A contract that fails to meet the requirements of a negotiable instrument and therefore is not subject to the provisions of UCC Article 3.
