Negotiation

Question 1

Negotiation Definition

Answer 1

Transfer of negotiable instruments so transferee is a holder

Question 2

Order paper: how to become a holder?

Answer 2

Negotiation through proper indorsement and delivery

Question 3

Bear paper: how to become a holder?

Answer 3

Negotiation through delivery alone

Question 4

Last Indorsement rule

Answer 4

1) locate the last indorsement to see whether it is a order paper or bearer paper

Question 5

Indorsements: definition

Answer 5

a signature on a negotiable instrument by someone other than the maker, drawer, or acceptor normally on the back of the instrument

Question 6

Blank indorsements

Answer 6

1) payee signs the back of the paper

2) creates a bearer paper which can be negotiated through delivery alone

Question 7

Special indorsements

Answer 7

1) payee’s signature and designation of a new person to whom instrument is payable
2) creates an order paper which must be negotiated by proper indorsement and delivery

Question 8

Restrictive indorsements

Answer 8

1) “for deposit or collect” written after indorsement

2) must go to the bank and cannot be passed along to other parties