Finals Coverage Flashcards
What is the liability of a drawee bank? How about a collecting bank?
The drawee bank, or the bank which a check is drawn, is bound by its contractual obligation to its client (the drawer) to pay the check only to the payee or the payee’s order.
The collecting bank on the other hand, is where a check is deposited, and which endorses the check upon presentment with the drawee bank, is an endorser.
What are the requisites for a negotiable instrument?
An instrument to be negotiable, must conform to the following requirements:
(a) It must be in writing and signed by the maker or drawer
(b) Must contain an unconditional promise or order to pay a sum certain in money
(c) It must payable on demand or at a determinable future time
(d) It must be payable to order or to bearer
(e) If it is addressed to a drawee, he must be named or indicated therein with reasonable certainty
What is a promissory note?
A negotiable promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.
What is a bill of exchange?
A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
What is a check?
A check is a bill of exchange drawn on a bank payable on demand. Except as herein otherwise provided, the provisions of this Act applicable to a bill of exchange payable on demand apply to a check.
What is a bank draft?
A draft has been defined as a check drawn by a bank, the only distinguishing feature between a draft and an ordinary check being the character of the drawer.
What are the effects of a crossed check?
A crossed check is where two parallel lines are drawn across the face or across the corner of the instrument, and carries with it the following effects:
(a) The check may not be encashed but only deposited in the bank;
(b) The check may be negotiated only once to the one who has an account with the bank; and
(c) The act of crossing the check serves as a warning to the holder that the check has been issued for a definite purpose and he must inquire if he received the check pursuant to this purpose; otherwise, he is not a holder in due course.
(d) The crossing of a check, thus, means that the check should be deposited only in the account of the payee.
What constitutes a holder in due course?
A holder in due course is a holder who takes the instrument in the following instances:
(a) The instrument is complete and regular upon its face
(b) He became the holder of it before it was overdue, and without notice that it was previously dishonored
(c) That he took it in good faith or for value
(d) That at the time it was negotiated to him, he has no notice of any infirmity or defect in the title of the person negotiating it
What are the liabilities of a drawer?
The drawer by drawing the instrument admits the existence of the payee and his then capacity to indorse; and engages that, on due presentment, the instrument will be accepted or paid, or both, according to its tenor, and that if it be dishonored and the necessary proceedings on dishonor be duly taken, he will pay the amount thereof to the holder or to any subsequent indorser who may be compelled to pay it.
What are the liabilities of a maker?
The maker of a negotiable instrument, by making it, engages that he will pay it according to its tenor, and admits the existence of the payee and his then capacity to indorse.
What are the liabilities of an indorser?
A person placing his signature upon an instrument otherwise than as maker, drawer, or acceptor, is deemed to be indorser unless he clearly indicates by appropriate words his intention to be bound in some other capacity.
What are the liabilities of an acceptor?
The acceptor, by accepting the instrument, engages that he will pay it according to the tenor of his acceptance and admits:
(a) The existence of the drawer, the genuineness of his signature, and his capacity and authority to draw the instrument; and
(b) The existence of the payee and his then capacity to indorse.
What is the definition of an accommodated party?
An accommodation party is one who has signed the instrument as maker, drawer, acceptor, or indorser, without receiving value therefor, and for the purpose of lending his name to some other person.
What is the definition of an irregular indorser?
Where a person, not otherwise a party to an instrument, places thereon his signature in blank before delivery, he is liable as indorser.
What is the definition of a referee in case of need?
The drawer of a bill and any indorser may insert thereon the name of a person to whom the holder may resort in case of need; that is to say, in case the bill is dishonored by non-acceptance or non-payment. Such person is called a referee in case of need. It is in the option of the holder to resort to the referee in case of need or not as he may see fit.
