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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
Endorsement/ Indorsement
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
Endorser/ Indorser
o The payee of a note or draft transferring the instrument to another party
27
Endorsee/ Indorsee
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
Types of Endorsement
* Blank * Special * Restrictive * Qualified
29
Blank Endorsement
* Having no words other than signature of endorser | * “Mary A. Johnson”
30
Special Endorsement
* An endorsement which designates the particular person to whom payment is to be made * “Pay to the order of John Q. Jones”
31
Restrictive Endorsement
* An endorsement which prevents the use of the instrument for anything except stated use * “For deposit only”
32
Qualified Endorsement
* 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
Holder in Due Course
* Person in possession of a negotiable instrument who accepts the negotiable instrument in good faith and for value * INNOCENT PURCHASER
34
Requirements for a Holder in Due Course
* 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
Rights of a Holder in Due Course
* Right to collect amount due | * Right to be free from defense of no consideration
36
Liability for Payment of Negotiability
• Related to: o Requirements to qualify as a holder in due course o Rights of a holder in due course
37
Transferor's Warranties
* 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
Bailment
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
Bailor
• Party who gives up possession, but not title of property
40
Bailee
• Party who acquires possession, but not title of personal property
41
Classification of Bailments
Ordinary | Extraordinary
42
Ordinary Bailment
o Those held to “normal” standard of care for bailed property
43
Extraordinary Bailment
o Those held to higher than normal standard of care for bailed property • Common carriers • Hotelkeepers • Funeral directors
44
Conditions of Bailment
o Bailor delivers property to bailee o Bailee accepts property from bailor o Both parties agree that property will be returned to bailor
45
Types of Bailment
o Sole benefit of bailor o Sole benefit of bailee o Mutual benefit
46
Sole Benefit of Bailor
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
Sole Benefit of Bailee
o Occurs when borrowing someone’s property | o Bailee must exercise “great care”
48
Mutual Benefit
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
What are the two types of Carriers?
Private | Public
50
Private Carrier
o Transports under special arrangements for a fee • Moving vans • Delivery services • Funeral Home A transports a body for Funeral Home B
51
Public Carrier
o Common Carrier • One that undertakes to transport without discrimination for all who apply for service • Airlines, trains, buses, ect.
52
Consignor
• One who ships goods by a common carrier
53
Consignee
• One to whom goods are shipped to by a common carrier
54
Bill of Lading
* Is the receipt and contract existing between CONSIGNOR (SHIPPER) AND CARRIER * Is documentary evidence of title of goods
55
Elements of the Bill of Lading
* 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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