chapter 24 Flashcards
Negotiable instruments include
4 of them
Drafts,
checks,
promissory notes,
(Certificates of deposit).
One way to pay for things is? and the other is?
One way to pay for things is cash. Another is by using a negotiable instrument.
the key feature of a negotiable instrument is
negotiability.
Negotiability is a
legal concept that makes written instruments freely transferable and therefore a readily accepted form of payment in substitution for money.
The three parties to a check
Drawer, drawee, payee
The drawer is the party
issuing an order to pay a check or a draft.
The drawee is
the party ordered to pay a draft or check (the bank)
The payee is the
the person to receive payment by an instrument.
Mary writes a check to the order of John and the check is drawn on CFSB bank.
whose the Drawer, drawee and the payee
Mary is the drawer
•CFSB bank is the drawee
•John is the payee.
A promissory note is a
written promise by a maker (issuer) to pay a payee.
Maker
issuer of a promissory note or a certificate of deposit.
Certificate of deposit:
a specialized form of a note that is given by a bank or thrift association.
Formal requirements
9 of them
- Be in writing
- Be signed
- Contain a promise or order to pay
- Be unconditional
- Be for a fixed amount
- Be for money
- Contain no other undertaking or instruction
- Be payable on demand or at a definite time
- Be payable to order or to bearer.
Writing
The writing requirement is broadly construed.
•Written on a pizza box, napkin, or a coconut. That satisfies the writing requirement.
Signature is
Signature is any symbol executed or adopted by a party with the intention to validate a writing.
Unconditional
An absolute promise to pay that is not subject to any contingencies
Demand paper
Demand paper payable on request
Time paper:
Time paper: payable at a definite time.
Definite time
Definite time:•
1. at a fixed date or dates
•2. at a definite period of time after sight or acceptance or At a time readily ascertainable at the time the promise or order is issued.
Payable to order:
Payable to order: payable to the order of a named person or anyone designated by that person.
A negotiable instrument must contain words
A negotiable instrument must contain words indicating that the maker or drawer intends that it pass into the hands of someone other than payee.
Payable to bearer
Payable to the holder of the instrument includes instruments payable to bearer, to an unspecified payee, or to cash.
