chapter 24

Question 1

Negotiable instruments include

4 of them

Answer 1

Drafts,
checks,
promissory notes,
(Certificates of deposit).

Question 2

One way to pay for things is? and the other is?

Answer 2

One way to pay for things is cash. Another is by using a negotiable instrument.

Question 3

the key feature of a negotiable instrument is

Answer 3

negotiability.

Question 4

Negotiability is a

Answer 4

legal concept that makes written instruments freely transferable and therefore a readily accepted form of payment in substitution for money.

Question 5

The three parties to a check

Answer 5

Drawer, drawee, payee

Question 6

The drawer is the party

Answer 6

issuing an order to pay a check or a draft.

Question 7

The drawee is

Answer 7

the party ordered to pay a draft or check (the bank)

Question 8

The payee is the

Answer 8

the person to receive payment by an instrument.

Question 9

Mary writes a check to the order of John and the check is drawn on CFSB bank.
whose the Drawer, drawee and the payee

Answer 9

Mary is the drawer
•CFSB bank is the drawee
•John is the payee.

Question 10

A promissory note is a

Answer 10

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

Question 11

Maker

Answer 11

issuer of a promissory note or a certificate of deposit.

Question 12

Certificate of deposit:

Answer 12

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

Question 13

Formal requirements

9 of them

Answer 13

• 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.

Question 14

Writing

Answer 14

The writing requirement is broadly construed.

•Written on a pizza box, napkin, or a coconut. That satisfies the writing requirement.

Question 15

Signature is

Answer 15

Signature is any symbol executed or adopted by a party with the intention to validate a writing.

Question 16

Unconditional

Answer 16

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

Question 17

Demand paper

Answer 17

Demand paper payable on request

Question 18

Time paper:

Answer 18

Time paper: payable at a definite time.

Question 19

Definite time

Answer 19

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.

Question 20

Payable to order:

Answer 20

Payable to order: payable to the order of a named person or anyone designated by that person.

Question 21

A negotiable instrument must contain words

Answer 21

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

Question 22

Payable to bearer

Answer 22

Payable to the holder of the instrument includes instruments payable to bearer, to an unspecified payee, or to cash.