Commercial Paper Flashcards
Requirements of Negotiable Instrument
FAMOUS
Payable at FIXED times or on demand
For a certain AMOUNT ( money only)
MUST be in WRITiNG
Payable to ORDER or TO BEARER (except check)
Contain UNCONDITIONAL PROMISE (except” subject to”, “contingent upon” is not negotiable)
SIGNED by the MAKER or DRAWER
Transfers of Negotiable Instruments
NEGOTIATION: transferee has same rights as transferor or superior right
BEAR PAPER: Negotiated by delivery alone
ORDER PAPER: Negotiated by delivery and endorsement
Types of Endorsements ( on the back of instrument)
BLANK: sign of payee converts order paper to bear paper
SPECIAL: Payee SIGNS and names NEW PAYEE ( “pay to A”, signed B is special endorsement) ENDORSEment is required for further Negotiation
QUALIFIED=Without Recourse: not restrict further negotiation, endorser not guarantee pmt upon dishonor
RESTRICTED= Only, or For deposit : Add condition but Does NOT PREVENT further negotiation
4 Requirements to be a Holder in Due Course HDC
Instrument taken for VALUE ( not gift or service): money, negotiable instrument
Taken in GOOD FAITH
WITHOUT Notice of DEFENSES to or Claims of Ownership on the instrument
NEGOTIABILITY ( front only)
Shelter Doctrine, HOlder has SAME RIGHT as HDC if
Anyone who receive instrument from an HDC gets all of the rights of an HDC even if they are not HDC and know about the fraud
Real defenses of HDC ( DRAWER or MAKER win HDC)
FRAUD in Execution: tricked to sign sth
FORGERY
Adjudicial Insanity Infancy Illegality Duress Discharge of bankruptcy Suretyship defenses Statue of limitation
Personal Defense ( HDC win)
Breach of contract
Lack of consideration
Imposter, fictitious name
Simple duress
Fraud in the inducement
A wrongful filling of amount payable
Liabilities of the parties
NOTE/CD:
+ Maker: Primary liab
+ Endorsers: Secondary liab
DRAFT/CHECK:
+ Drawee: Primary liab if they accept the pmt
+ Drawer and Endorsers: Secondary liab
If ENDORSERS sign Without Recourse, they wont be liab
Stop pmt orders
ORAL STOP pmt: only good for 14days
WRITTEN Stop pmt: only good for 6months
WARRANTY LIAB exist even if u dont sign or sign without recourses
Document of title
NEGOTIABLE if face of Document contains words of negotiability( Order or Bearer)
Containing Promise to deliver goods to the order of a named person->Order paper
””"”deliver goods to bearer->Bear paper
Bill of lading
Doc issued by common carrier, given seller evidencing receipt of good for shipment
Is nonnegotiable if the bill states that the goods are to be delivered to a consignee. Endorsement of nonnegotiable bill doesnt:
+ make the bill negotiable
+give the transferee any additional right
Warehouse receipt
Doc issued by warehouseman
Must contain location of warehouse
Date issue
Rate charges
Description of goods
Signature of warehouseman
Due negotiable ~HDC
Doc of title negotiated to a holder who take in good faith, value, with knowledge of defenses
Holder by Due negotiation rights
Title to document
Title to goods
All rights accruing under law of agency or estoppel
Same defense as HDC
Drafts
Order 3rd party to pay
Include 3 parties:
+Drawer:issuer
+Drawee: party receive the money
+Payee:party is ordered to pay the payee
Sight draft: draft payable on demand
NOT a promise to pay, it is a ORDER to pay
Article 3 UCC, pmt on a negotiable instrument may be designated
To come from a particular source of fund
Article 3 UCC, postdating a check
Doesnt destroy negotiability
But make check properly payable on or after the date written on the check
Risk of loss pass for warehouse receipt if there is no agreement to contrary and neither parties breach
RoL pass at the time the negotiable document of title is properly negotiated to the buyer
Trade acceptance
Draft by SELLER ordering a buyer to pay the seller or some 3rd party at a future time
Investment securities
Include:
+ Stock and bond
+Document of title
Are NOT Commercial Paper but following the same rules
Warehouse receipt
The document of title issued by a person who stores goods for another
Security includes
Limited partnership interests
Rights & warrants
Treasury stocks
Investments contracts: bond, stock, note, CDs, debenture
