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Commonwealth 2nd Quarter > Business Law Exam 3 > Flashcards

Business Law Exam 3 Flashcards

1
Q

Commercial Paper

A

o Document drawn in a special form which can be transferred from person to person as a substitute for money or as an instrument of credit
o Negotiable instrument

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2
Q

Classifications

A
  • Promises to pay

* Orders to pay

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3
Q

Promises to Pay

A

Promissory Note

Certificate of Deposit

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4
Q

Promissory Note

A

o 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
• This is one example of commercial paper

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5
Q

Certificate of Deposit (COD)

A

o Acknowledgment by a bank of receipt of money with an agreement of repayment
o Example:
• $1,000 Certificate of Deposit
• Maturity Date January, 2005
• Interest 6%
• At maturity date bank will pay principle, plus interest

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6
Q

Maker

A

o Person who executes a promissory note

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7
Q

Payee

A

o Party to whom any negotiable instrument is made payable

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8
Q

Orders to Pay

A

Draft

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9
Q

Draft

A

o Written order signed by one person requiring the person to whom addressed to pay a particular sum of money, to order or bearer, on demand at a certain time
• Second example of commercial paper

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10
Q

Types of Orders to Pay

A 
•	Check
o	Certified check
o	Cashier’s check
o	Bank draft
o	Voucher check
o	Traveler’s check
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11
Q

Certified Check

A
  • Ordinary Check which an official of a bank has accepted by writing across the face of the check the word “certified” and signed
  • This makes the bank liable for the payment
  • The drawer is released from the liability
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12
Q

Cashier’s Check

A
  • Check drawn on a bank’s own funds
  • Signed by a responsible bank official or a cashier
  • Bank may use to pay its own obligations
  • May be used by someone in lieu of their own personal check
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13
Q

Bank Draft

A
  • Check drawn by one bank on another
  • Banks will keep a portion of their funds in other banks
  • Bank can draw a check on these funds at will
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14
Q

Voucher Check

A
  • Check with voucher attached

* Voucher lists items of an invoice being paid by the check

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15
Q

Traveler’s Check

A
  • Similar to cashier’s check

* Requires signature and countersignature by purchaser

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16
Q

Drawer

A

o Person who executes/writes any draft or check

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17
Q

Drawee

A

o Person, company, or financial institution ordered to pay a draft or check

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18
Q

Payee

A

o Party to whom any negotiable instrument is made payable

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19
Q

Requirements for Negotiability

A
  • Must be in writing and signed by the maker
  • Contain an unconditional order or promise to pay a certain sum in money
  • Payable on demand at a definite time
  • Payable to “order” or to “bearer”
  • Order paper
  • Bearer paper
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20
Q

Order Paper

A
  • A commercial paper made payable “to the order of” some named party
  • Word “order” or its equivalent must be used
  • Order paper may be paid only to the person to whom it has been properly endorsed
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21
Q

Bearer Paper

A

• A commercial paper made payable to any person in possession of it

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22
Q

Transfer of Negotiable Instruments

A

Negotiation
Holder
Endorsement/Indorsement

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23
Q

Negotiation

A

• A commercial paper made payable to any person in possession of it

24
Q

Holder

A

o Person who has possession of a delivered negotiable instrument

25
Q

Endorsement/ Indorsement

A

o The signature or statement of purpose by the owner on the back of a negotiable instrument, which indicates future control of the instrument

26
Q

Endorser/ Indorser

A

o The payee of a note or draft transferring the instrument to another party

27
Q

Endorsee/ Indorsee

A

o Person who becomes the holder of a negotiable instrument by endorsement which names him/her as the person to whom the instrument is negotiated

28
Q

Types of Endorsement

A
  • Blank
  • Special
  • Restrictive
  • Qualified
29
Q

Blank Endorsement

A
  • Having no words other than signature of endorser

* “Mary A. Johnson”

30
Q

Special Endorsement

A
  • An endorsement which designates the particular person to whom payment is to be made
  • “Pay to the order of John Q. Jones”
31
Q

Restrictive Endorsement

A
  • An endorsement which prevents the use of the instrument for anything except stated use
  • “For deposit only”
32
Q

Qualified Endorsement

A
  • Limits liability of endorser
  • Endorser signs the bill or promissory note and adds “Without recourse”
  • This limits the endorser’s liability
  • Endorsee accepts the liability
33
Q

Holder in Due Course

A
  • Person in possession of a negotiable instrument who accepts the negotiable instrument in good faith and for value
  • INNOCENT PURCHASER
34
Q

Requirements for a Holder in Due Course

A
  • The holder
  • Must take instrument in good faith and for value
  • Must have no notice that instrument is overdue or has been dishonored
  • At time of negotiation, no notice of any defense against or adverse claim to the instrument
35
Q

Rights of a Holder in Due Course

A
  • Right to collect amount due

* Right to be free from defense of no consideration

36
Q

Liability for Payment of Negotiability

A

• Related to:
o Requirements to qualify as a holder in due course
o Rights of a holder in due course

37
Q

Transferor’s Warranties

A
  • Transferor of commercial paper
  • Warrants existence of certain facts
  • Specified by UCC
  • Transferor entitled to enforce the instrument
  • All signatures genuine or authorized
  • Instrument has not been altered
  • Instrument not subject to defense or claim of any party
  • Transferor has no knowledge of insolvency proceedings with maker, acceptor, or drawer of unaccepted draft
38
Q

Bailment

A

o Transfer of Possession, but not title of personal property by one party to another, under agreement
• Examples:
• Leaving a car with the garage for repairs
• Storing furniture in a warehouse
• Student borrowing a tuxedo

39
Q

Bailor

A

• Party who gives up possession, but not title of property

40
Q

Bailee

A

• Party who acquires possession, but not title of personal property

41
Q

Classification of Bailments

A

Ordinary

Extraordinary

42
Q

Ordinary Bailment

A

o Those held to “normal” standard of care for bailed property

43
Q

Extraordinary Bailment

A

o Those held to higher than normal standard of care for bailed property
• Common carriers
• Hotelkeepers
• Funeral directors

44
Q

Conditions of Bailment

A

o Bailor delivers property to bailee
o Bailee accepts property from bailor
o Both parties agree that property will be returned to bailor

45
Q

Types of Bailment

A

o Sole benefit of bailor
o Sole benefit of bailee
o Mutual benefit

46
Q

Sole Benefit of Bailor

A

o Bailment benefits only property owner
o Bailee must exercise “slight care”
o Liable only for gross negligence
• Example:
• You own a piano; you plan to move into a new apartment; you ask a friend to store your piano; your friend does not play the piano
• Only you benefit from the friend who stores your piano

47
Q

Sole Benefit of Bailee

A

o Occurs when borrowing someone’s property

o Bailee must exercise “great care”

48
Q

Mutual Benefit

A

o Bailee renders a service
o Charges for the service
o Bailee must exercise “reasonable care under the circumstances”
• Example:
• You own a mink coat; you store your coat at ABC Cleaners for the summer months; your coat is stored; ABC Cleaners is paid for the storage service

49
Q

What are the two types of Carriers?

A

Private

Public

50
Q

Private Carrier

A

o Transports under special arrangements for a fee
• Moving vans
• Delivery services
• Funeral Home A transports a body for Funeral Home B

51
Q

Public Carrier

A

o Common Carrier
• One that undertakes to transport without discrimination for all who apply for service
• Airlines, trains, buses, ect.

52
Q

Consignor

A

• One who ships goods by a common carrier

53
Q

Consignee

A

• One to whom goods are shipped to by a common carrier

54
Q

Bill of Lading

A
  • Is the receipt and contract existing between CONSIGNOR (SHIPPER) AND CARRIER
  • Is documentary evidence of title of goods
55
Q

Elements of the Bill of Lading

A
  • Instrument in writing
  • Signed by the carrier
  • Describing the freight for identification
  • States the name of the consignor
  • The terms of the contract for carriage
  • Directing location of delivery

Commonwealth 2nd Quarter (22 decks)

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