Commercial Paper - Elements, Definitions and Examples of negotiable instruments Flashcards
Memorize UCC Art 3 for Florida Bar MC
What is a negotiable instrument?
Signed writing that orders or promises to pay a sum of money
What are the types of negotiable instruments?
Draft and Note
What is a draft?
A draft is a three-party instrument where the DRAWEE directs the DRAWER/PAYOR to pay the PAYEE a sum of money.
Who is the DRAWER?
The party in a DRAFT who orders the drawee/payor to pay a sum of money to the payee
Who is the DRAWEE?
The middle man in a draft - the party who pays the money to the payee.
Ex: the bank is the drawee when the draft is a check
Who is the PAYEE?
In a NOTE OR DRAFT, the payee is the party who receives the draft or note.
What is a note?
Two party instrument in which one party - the maker - promises to pay the other party - the payee - a sum of money on demand or on a certain date.
Who is a maker?
Party who promises to pay a certain sum - the creator (debtor) of the NOTE
What are the elements of Negotiable instruments?
- Instrument in writing,
- Signed by the Drawer or Maker.
- containing an unconditional promise or order,
- to pay a fixed amount of money,
- Payable to ORDER [then name] or BEARER
- Either on demand or on a certain date
What is a check and what are some types of checks?
A check is a draft drawn upon a bank and is payable on demand.
Examples - personal check, cashier’s check, certified check
What is a promissory note?
negotiable instrument wherein maker promises to pay a sum certain on demand or at a definite time - essentially acting as a legal promise to pay a loan.
What is the difference between a draft and note?
Note - two-party instrument where the maker promises to pay payee a sum of money
Draft - three-party instrument where drawer directs drawee to pay a sum of money
If an instrument falls within the definition of both, can be enforced as either.
What makes the order to pay conditional?
1) the language that makes payment contingent on an event or something else
2) contains language that makes the instrument “subject to” or “governed by” another document
(just referencing a document is ok)
3) contains language that the “rights and obligations” are stated in another writing
