commercial paper Flashcards
elements of a negotiable instrument
1) writing, signed by the maker,
2) containing an unconditional promise, to pay a fixed amount of money,
3) to order or bearer,
4) payable on demand or at a definite time,
5) and without stating any additional undertaking or instruction.
If a promise or order contains an express condition to payment
it is not a negotiable instrument.
A negotiable instrument must be payable in money, which includes
currency and currency funds.
The principal amount to be paid also must be
a fixed amount of money, as defined by the instrument.
Under the UCC, a negotiable instrument may instruct that payment be in
foreign currency.
It is also permissible for the note to direct that the calculation of Euros be on
the due date of the note.
A negotiable instrument must be either
an order or a bearer instrument
An order instrument is payable only to
the person named or to his order.
for an order instrument the term ____________ must appear
“order” must appear
A bearer instrument, is payable to
anyone who possesses the instrument.
an instrument which contains both ________ and __________ language satisfies the UCC
“order and bearer” language
a negotiable instrument must be payable either __________ or at a ______________
either on demand or at a definite time
An instrument is payable at a definite time if it is payable:
(i) on a fixed date,
(ii) at the end of a definite period after sight or acceptance, or
(iii) at a time readily ascertainable when the instrument is issued.
“on payees birthday” renders the note non-negotiable because
thats not a definite time which the note is payable; must also have a specific date listed for payees birthday
whether there is an acceleration event that is uncertain to happen, but also a definite date upon which payment is due, does the uncertain acceleration clause affect negotiability
NO, An acceleration clause that keys payment to an event that is uncertain to happen does not destroy the negotiability of the note.
An instrument is payable to order if
it identifies a person (e.g., “Pay to the order of Joe Smith”) or order (“Pay Joe Smith or his order”)
To negotiate an order instrument, the holder must
transfer of possession of the instrument and indorse it
A “special indorsement” names
an identified person as indorsee in addition to the indorsement
when theres a “special indorsement”
The indorsee must sign in order for the instrument to be further negotiated.
restrictive words such as “only” in the indorsement are generally
ineffective as a limitation on the subsequent transfer of the instrument.
Unless explicitly stated, an instrument does not automatically convey
an interest payment
Interest may be
at a fixed or variable rate
Interest may be
determined by reference to other documents or information
If the instrument specifies only that interest will be paid, the rate is the
established judgment rate in the jurisdiction of the place of payment of the instrument at the time interest first accrues.