Ch. 24: Form and Content

Question 1

Negotiable instruments

Answer 1

Include drafts, checks, promissory notes, and certificates of deposit.

Question 2

Negotiability

Answer 2

Invests instruments with a high degree of market ability and commercial utility by conferring upon certain good faith transferees immunity from most defenses to the instrument.

Question 3

Draft

Answer 3

A draft involves three parties: the drawer orders the drawee to pay a fixed amount of money to a payee.

Question 4

Drawer

Answer 4

Issuer of an order to pay (draft or check)

Question 5

Drawee

Answer 5

Party ordered to pay a draft or a check.

Question 6

Payee

Answer 6

Person to receive payment by an instrument.

Question 7

Check

Answer 7

A specialized form of draft that is drawn on a bank and payable on demand; the drawer orders the drawee (bank) to pay the payee on demand (upon the request of the holder).

Question 8

Demand

Answer 8

Request for payment made by the holder of an instrument.

Question 9

Promissory note

Answer 9

A written promise by a maker (issuer) to pay a payee. 

Question 10

Maker

Answer 10

Issuer of a promissory note or certificate of deposit.

Question 11

Certificate of deposit

Answer 11

A specialized form of note that is given by a bank or thrift association.


Question 12

Formal requirements

Answer 12

Negotiability is wholly a matter of form, and all the requirements for negotiability must be met within the “four corners“ of the instruments.

Question 13

Writing

Answer 13

Any reduction to tangible form is sufficient.

Question 14

Signature

Answer 14

Any symbol executed or adopted by a party with the intention to adopt or except a writing.

Question 15

Promise to pay

Answer 15

An undertaking to pay, which must be more than a mere acknowledgment or recognition of an existing debt.

Question 16

Order to pay

Answer 16

Instruction to pay

Question 17

Unconditional

Answer 17

An absolute promise to pay that is not subject to any contingencies.

Question 18

Reference to another agreement

Answer 18

Does not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement.

Question 19

Particular fund doctrine

Answer 19

In order to pay or promise to pay only out of a particular fund is not conditional and does not destroy negotiability.

Question 20

Fixed amount

Answer 20

The holder must be assured of a determinable minimum principal payment, although provisions in the instrument may increase the amount of recovery under certain circumstances.

Question 21

Money

Answer 21

Medium of exchange currently authorized or adopted by a domestic or foreign government.

Question 22

No other undertaking or instruction

Answer 22

I promise or order to do an act in addition to the payment of money destroys negotiability.

Question 23

Demand paper

Answer 23

Payable on request

Question 24

Time paper

Answer 24

Payable at a definite time.

Question 25

Payable to order or to bearer

Answer 25

A negotiable instrument must contain words indicating that the maker or drawer intends that it pass into the hands of someone other than the payee.

Question 26

Payable to order

Answer 26

Payable to the “order of“ (or other words that mean the same) a named person or anyone designated by that person.

Question 27

Payable to bearer

Answer 27

Payable to the holder of the instrument; includes instruments payable (1) to bearer (2) to an unspecified payee, or (3) to cash.