Chapter 19 Vocabulary Flashcards
Any instrument drawn on a drawee that orders the drawee to pay a certain amount of funds, usually to a third party (the payee), on demand or at a definite future time.
Draft
The party that initiates a draft (such as a check), thereby ordering the drawee to pay.
Drawer
The party that is ordered to pay a draft or check. With a check, a bank or a financial institution is always this.
Drawee
A person to whom an instrument is made payable.
Payee
In negotiable instruments law, a drawee’s signed agreement to pay a draft when it is presented.
Acceptance
A drawee that accepts, or promises to pay, an instrument when it is presented later for payment.
Acceptor
A draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of funds to the payee on demand.
Check
A written promise made by one person (the maker) to pay a fixed amount of funds to another person (the payee or subsequent holder) on demand or on a specified date.
Promissory Note
One who promises to pay a fixed amount of funds to the holder of a promissory note or a certificate of deposit (CD).
Maker
A note issued by a bank in which the bank acknowledges the receipt of funds from a party and promises to repay that amount, with interest, to the party on a certain date.
Certificate of Deposit (CD)
The act of presenting an instrument to the party liable on the instrument in order to collect payment. Also occurs when a person presents an instrument to a drawee for a required acceptance.
Presentment
A clause that allows a payee or other holder of a time instrument to demand payment of an entire amount due, with interest, if a certain event occurs, such as a default in the payment of an installment when due.
Acceleration Clause
Any person in possession of an instrument drawn, issued, or indorsed to him or her, to his or her order, to bearer, or in blank.
Holder
A clause in a time instrument that allows the instrument’s date to be extended into the future.
Extension Clause
A negotiable instrument that is payable “to the order of an identified person” or “to an identified person or oder.”
Order Instrument
Any instrument that is not payable to a specific person, including instruments payable to the bearer or to “cash.”
Bearer Instrument
A person in possession of an instrument payable to bearer or indorsed in blank.
Bearer
The transfer of an instrument in such form that the transferee (to person to whom the instrument is transferred) becomes a holder.
Negotiation
A signature placed on an instrument for the purpose of transferring ownership rights in the instrument.
Indorsement
An indorsement on an instrument that specifies no indorsee. An order instrument that is indorsed in blank becomes a bearer instrument.
Blank Indorsement
An indorsement on an instrument that identifies the specific person to whom the indorser intends to make the instrument payable.
Special Indorsement
An indorsement on a negotiable instrument in which the indorser disclaims any contract liability on the instrument. The notation “without recourse” is commonly used to create this.
Qualified Indorsement
An indorsement on a negotiable instrument that requires the indorsee to comply with certain instructions regarding the funds involved.
Restrictive Indorsement
An indorsement to a person who is to hold or use funds for the benefit of the indorser or a third person.
Trust Indorsement (Agency Indorsement)
