Commercial Paper Flashcards

1
Q

What is Commercial Paper?

A

A written instrument for the payment of money

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2
Q

What is a note?

A

A two-party instrument, as a promise to pay money.

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3
Q

What is a Maker?

A

The party that creates a note as the payor

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4
Q

What is a payee?

A

The person due to be paid under a note.

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5
Q

What is a certificate of deposit?

A

A special type of note issued by a financial institution as payor. The financial Institution must acknowlege receipt of money and and promose to repay the money.

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6
Q

What is a draft?

A

A three-party instrument, as an order to pay money to someone else. The drawer is the person ordering payment, the drawee is the person making the payment, and the payee is the person receiving payment.

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7
Q

What is a check?

A

A type of draft where a financial institution is the drawee and it is payable on demand, whenevr the payee wants it.

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8
Q

What is a certified check?

A

A check that he bank has accepted or agreed to pay.

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9
Q

What is a cashier’s check?

A

When the drawer and drawee are the same bank. The person receiving the funds is the remitter.

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10
Q

What is a teller’s check?

A

When the bank is the drawer of a check on another bank, with the payee referred to as a remitter

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11
Q

What is a traveler’s check?

A

a check requiring a counter-signature (two signatures).

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12
Q

What is a remotely-created item/demand draft?

A

A draft not signed by the drawer, but created with the drawer’s authority, like phone or internet.

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13
Q

What is negotiability?

A

The ability of an instrument in its FORM, at the time of issuance, to be able to reach a holder in due course.

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14
Q

What happens when an instrument is not negotiable?

A

It cannot reach/create a holder in due course, and the holder is subject to normal contract rules.

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15
Q

What are the elements of negotiability?

A

Eight elements:

1) . In writing
2) . signed by the maker/drawer. This can be any symbol.
3) . An unconditional promise or order to pay. A condition to payment breaks this, referencing other things won’t. See outline for more.
4) . For a fixed amount of principal
5) . In money, not goods/services
6) . No other undertaking or instruction–this can’t be a full contract, just an obligation to pay. *See outline
7) . Payble on demand or at a definite time
8) . Must contain words of negotiability. (bearer or order language)

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16
Q

What must the receiver of an instrument do to negotiate it?

A

to be a holder of an instrument, the receiver must have possession of it and good title to it.

17
Q

How does a holder get good title to a bearer instrument?

A

merely possess it.

18
Q

How does a holder get good titled to an order instrument?

A

Have the required indorsements: signature on the instrument by someone other than the drawer, normally on the back

19
Q

What types of indorsements are there?

A

Blank endorsement: when the payee signs the instrument, this creates a bearer instrument.
A special indorsement: when the payee signs and makes it payable to another person, creating order paper.
A restrictive indorsement: when the signee limits what can be done with the instrument. If the drawee does not comply with the limitation, the drawee is liable.

20
Q

What are the requirements to be a holder in due course?

A

6 elements:

1) . there must be a negotiable instrument
2) . he must be a holder
3) . The instrument is apprently authentic
4) . the holder must pay value
5) . He must have god faith
6) . He must have no notice of anything wrong with the instrument.

21
Q

When migh a holder not meeting the HDC status still get HDC rights?

A

When he is sheetlered by a previous HDC by the Shelter rule, giving him the same rights as the transferor.

22
Q

What must the receiver of an instrument do to negotiate it?

A

to be a holder of an instrument, the receiver must have possession of it and good title to it.

23
Q

How does a holder get good title to a bearer instrument?

A

merely possess it.

24
Q

How does a holder get good titled to an order instrument?

A

Have the required indorsements: signature on the instrument by someone other than the drawer, normally on the back

25
Q

What types of indorsements are there?

A

Blank endorsement: when the payee signs the instrument, this creates a bearer instrument.
A special indorsement: when the payee signs and makes it payable to another person, creating order paper.
A restrictive indorsement: when the signee limits what can be done with the instrument. If the drawee does not comply with the limitation, the drawee is liable.

26
Q

What are the requirements to be a holder in due course?

A

6 elements:

1) . there must be a negotiable instrument
2) . he must be a holder
3) . The instrument is apprently authentic
4) . the holder must pay value
5) . He must have god faith
6) . He must have no notice of anything wrong with the instrument.

27
Q

When migh a holder not meeting the HDC status still get HDC rights?

A

When he is sheetlered by a previous HDC by the Shelter rule, giving him the same rights as the transferor.