Commercial Paper: Intro

Question 1

Negotiable Instruments

Answer 1

Article 3 of UCC
- method of payment that eases transfer of funds
- contract’s right to payment can be assigned, but original parties have defenses and rights
- separate the payment rights from the contract rights
Non-negotiable Instruments
- covered by contract law

Question 2

Negotiable Instruments:

General Types

Answer 2

Order to Pay: 3 party instrument 
(drawer, drawee, payee)
- Draft: 
- Check
Promise to Pay: 2 party instrument
(maker, payee)
- Notes
- CD's

Question 3

Negotiable Instruments:

Drafts

Answer 3

• Seller = drawer, buyer = drawee,
  seller or seller’s bank = payee
  Sight Draft: payable on demand upon issue and presentment
  Time Draft: draft payable by the drawee at a specific time
  Trade Acceptance: draft to pay purchase $ plus interest upon presentment to drawee acceptor

Question 4

Negotiable Instruments:

Checks

Answer 4

General:
Draft drawn on a bank payable on demand
Cashier’s Check: drawer & drawee are same bank
Teller’s Check: draft drawn by one bank on another
Traveler’s Check: draft payable on demand, special signature.
Certified Check: drawee accepts primary obligation to pay

Question 5

Negotiable Instruments:
Notes
CD’s

Answer 5

Notes General:
Written promise by maker to pay money to another party or bearer.
Promissory Note:
- not payable on demand or within definite time to a specific payee (or order) or to the bearer.
CD’s General:
- note made by a bank acknowledging that it has a deposit of funds payable to the holder

Question 6

Negotiable Instruments:

Non-negotiable Instruments

Answer 6

Letters of Credit
Warehouse Receipts
Bills of Lading
Stocks & Bonds
Contracts

Question 7

Negotiable Instruments:

Requirements

Answer 7

1. Written
2. Signed
3. Unconditional promise or order
4. Sum Certain in Money
5. Payable on Demand or at a Definite Time
6. Words of Negotiability: Order or Bearer
   - Order
   - identified person, agent, trust, etc.
   - Bearer
   - bearer, identified person or bearer, cash.