Intro to negotiable instruments Flashcards

1
Q

Which of the following conditions, if present on an otherwise negotiable instrument, would affect the instrument’s negotiability?
A. The instrument is payable six months after the death of the maker.
To be negotiable, an instrument must be payable at a definite time. This time may be at some future date, so long as that date can be determined with certainty.

For example, a note payable “Six years from Christmas Day, 1999” would be definite, because one can calculate an exact date – December 25, 2005. However, this note is nonnegotiable because date of death is not a certain date. The maker could die at any time, and so the date of payment is uncertain.
B. The instrument is payable at a definite time subject to an accelerated clause in the event of a default.
C. The instrument is postdated.
D. The instrument contains a promise to provide additional collateral if there is a decrease in value of the existing collateral.
Agreements on providing collateral do not render the instrument conditional and affect negotiability. So long as the note is payable on demand or at a definite time, in a sum certain in money, payable to order or to bearer, and is signed by the maker or drawer, the instrument is negotiable

A

A. The instrument is payable six months after the death of the maker.
To be negotiable, an instrument must be payable at a definite time. This time may be at some future date, so long as that date can be determined with certainty.

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2
Q

A. A check.
B. A draft.
C. A trade acceptance.

Negotiable instruments can be classified as “order to pay” or “promise to pay” instruments. Drafts and checks are “order to pay” instruments. Notes and certificates of deposits are “promises” to pay instruments. A trade acceptance is a form of a draft and thus an “order to pay” instrument.
D. A certificate of deposit.

A

D. A certificate of deposit.

Negotiable instruments can be classified as “order to pay” or “promise to pay” instruments. Drafts and checks are “order to pay” instruments. Notes and certificates of deposits are “promises” to pay instruments.

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