Commercial Paper Flashcards
The types of commercial paper governed by Article 3 of the UCC can be divided into two basic categories: _____ and _____.
notes and drafts
A note is a _____ party instrument and a draft is a _____ party instrument.
Two
Three
I, Max Maker, promised to pay to the order of Peter Payee the sum of One Hundred Dollars ($100)
Max Maker
Is an example of a _____.
Note.
TO: DRAWEE NATIONAL BANK
PAY TO THE ORDER OF Patricia Payee One-Hundred Dollars ($100)
Donna Drawer___
Is an example of a _____.
Draft.
_____ is the person who signs or is identified in a note as the
person undertaking to pay.
Maker
_____ is the person to whom the note is payable.
Payee
What parties are involved in making a note?
Maker and Payee
_____ the person who signs or is identified in a draft as the person ordering payment
_____ the person ordered in a draft to make payment
_____ the person to whom the draft is payable
Drawer
Drawee
Payee
Parties involved in draft . . .
Drawer
Drawee
Payee
When the drawee is a bank, and it is payable on demand, then the draft is a _____.
check
When the drawee is a _____, and _____, then the draft is a check.
bank
it is payable on demand
Also included in the general definition of commercial paper is a certificate of deposit. It is an acknowledgment by a bank that _____, and a _____.
a sum of money has been received
promise by the bank to repay the sum of money
- Seller and Buyer sign a contract. Seller delivers goods to Buyer, with Buyer agreeing
to pay within 60 days. Can Seller assign this right to receive payment to X?
a. If the goods turn out to be defective, must Buyer pay X?
2. Now assume that when Seller delivers goods to Buyer, Buyer issues to Seller a negotiable instrument (check or promissory note). Seller then negotiates the negotiable instrument to X, a holder in due course (HDC) who gives value, in good faith, with no notice that it is overdue or has been dishonored or of any defenses or claims. Here, X _____.
But note: certain defenses (real defenses) can be raised even as against a HDC [will discuss later].
If commercial paper is non-negotiable, then _____– the _____ stands in the shoes of the _____.
- Yes. Seller assignor and x is the assignee.
a. No. Generally, any defense that can be raised against the assignor, can be raised against the assignee. - takes free of most defenses (personal defenses) that Buyer could raise against Seller (including the defense that the goods are defective)
general principles of contract law apply
assignee
assignor
What are the requirements for a negotiable instrument?
- Writing
- Signed By Maker or Drawer
- Unconditional
- Promise To Pay or Order To Pay
- Fixed Amount
- In Money
- No Other Undertaking or Instruction
- On Demand or at a Definite Time
- To Order or To Bearer
Requirements of the writing element for negotiable instrument . . .
There is no such thing as an oral negotiable instrument. It must be something tangible. Almost always a piece of paper, but need not be (a t-shirt, a cow, a tamale, etc. – all technically O.K.)
How does the code define signed, for purposes of the signed by maker or drawer element for a negotiable instrument and what is the key to this element . . .
Signed by Maker (if note) or Drawer (if check):
Code defines “signed” as including “any symbol executed or adopted by a party with a present intention to authenticate a writing.”
a. Can be printed, stamped, written
Can be initials or thumbprint
Can be a trade name or assumed name Can appear in the body of the instrument
b. Key: Whether the party intended for that symbol to operate as her signature