Ch 26 - Negotiable Instruments

Question 1

negotiable instrument

Answer 1

written document containing the signature of the creator that makes an unconditional promise or order to pay a certain sum of money, either at a specified time or on demand

Question 2

note

Answer 2

promise by the maker of the note to pay a payee

Question 3

draft

Answer 3

order by a drawer to a drawee to pay a payee

Question 4

demand instrument

Answer 4

payee can demand payment at any time

Question 5

time instrument

Answer 5

payment can be made only at a specific future time

Question 6

CD

Answer 6

promise by a bank to pay a payee a certain amount of money at a future time

Question 7

check

Answer 7

specific draft, drawn by the owner of a checking account, ordering the bank to pay the payee from that drawer’s account

Question 8

seven requirements for negotiability

Answer 8

1. be a written document (relative permanence and movability)
2. be signed by the creator of the instrument
3. have an unconditional promise or order to pay
4. specify a fixed sum of money
5. specify payment either on demand or at a fixed future time
6. contain the words to the order of or words indicating it is a bearer instrument
7. contain no additional promises