Quarter 2 Final Exam Study Guide

Question 1

Article II

Answer 1

Concerns sale of tangible, movable, personal property

Question 2

Article III

Answer 2

Concerned with negotiable instruments

Question 3

Contract to Sell

Answer 3

Concerned with future goods meaning not yet in existence or owned by seller at the time of transaction

Question 4

Contract of Sale

Answer 4

Concerned with existing goods

Question 5

In a Contract to Sell (future goods), the title would pass _________

Answer 5

At some point in the future, usually upon delivery to buyer

Question 6

In a Contract of Sale (existing goods), the title would pass _______

Answer 6

Immediately when parties agree on the goods and the price

Question 7

Risk of loss passes from seller to buyer when ________

Answer 7

the title passes from seller to buyer

Question 8

Statute of Frauds of the UCC mandates _______

Answer 8

Contracts must be in writing to be enforceable

Question 9

States of Frauds of the UCC applies to a Sale of Goods for any merchandise that cost _______

Answer 9

$500 or more

Question 10

Consignment

Answer 10

Owner (consigner) gives to consignee to sell on their behalf; not really a sale

Question 11

Consignee

Answer 11

One who receives goods

Question 12

Consignor

Answer 12

One who ships goods

Question 13

Bill of Sale

Answer 13

A document that shows evidence of title/ownership to personal property; usually for buyers benefit to show ownership. Similar to a deed transferring real property and is not the contract.

Question 14

An exception to a Statute of Frauds under the UCC is _____

Answer 14

Non-resalable goods (specifically manufactured goods for specific buyer)

Question 15

Bearer Paper

Answer 15

Payable to the order of cash or bearer or to oneself

Question 16

Order Paper

Answer 16

Payable to the order of a named person; must be a legal entity

Question 17

Drafts

Answer 17

An order to pay

Question 18

Promissory Notes

Answer 18

A promise to pay

Question 19

Drawer

Answer 19

Executes (signs) a draft, makes the order to pay

(funeral home owner writes a check to an employee: the owner is the drawer)

Question 20

Drawee

Answer 20

The one ordered to pay a draft
(The bank)

Question 21

Payee

Answer 21

One to whom a payment is made

(employee)

Question 22

Maker

Answer 22

Executes (signs) a promissory note

(Susan creates a promissory note to pay Joe $10: Susan is the maker)

Question 23

Endorser

Answer 23

One who endorses an instrument on the reverse side

Question 24

Endorsee

Answer 24

One who has an instrument made payable to them through an endorsement

Question 25

Blank Endorsement

Answer 25

An endorsement that only needs the signature of the endorser

Question 26

Special Endorsement

Answer 26

An endorsement MADE PAYABLE TO ANOTHER person

Question 27

Restrictive Endorsement

Answer 27

An endorsement that limits the use of negotiation for a particular PURPOSE

Question 28

Qualified Endorsement

Answer 28

An endorsement that limits the liability of the endorser for payment; "Without Recourse"

Question 29

Negotiation

Answer 29

Transferring ownership of the negotiable instrument from one person to another

Question 30

Issuing

Answer 30

The first negotiation to the original payee

Question 31

How many requirements are there for an instrument to be negotiable?

Answer 31

1. Signed Writing 2. Order to pay if it is a draft/promise to pay if it's a note 3. Unconditional 4. Sum certain in money, an national medium of exchange which is legal tender where payable 5. Payable on demand (Immediately upon presentation or on a fixed future date) 6. Payable to the order of a named payee or bearer 7. Payee and drawee must be identified as real entities

Question 32

Bonds

Answer 32

A sealed written contract obligation secured by a deed of trust on corporate property; Can be issued by a corp/government entity

Question 33

Coupon Bond

Answer 33

Detachable Stubs each being payable on a certain date; IS NEGOTIABLE

Question 34

Registered Bond

Answer 34

A bond payable to a named person listed on the records of the corporation; IS NON-NEGOTIABLE

Question 35

Real Estate Mortgage Note

Answer 35

A promissory note secured by REAL property

Question 36

Collateral Note

Answer 36

A promissory note secured by PERSONAL property (Personal property: property that is not permanently affixed to land: e.g., equipment, furniture, tools and computers.)

Question 37

Debenture

Answer 37

A promissory note issued by a corporation under seal but is NOT secured - promissory note under seal but not secured

Question 38

Certificate of Deposit (CD)

Answer 38

An acknowledgement by a bank of the recipient of money and a promise to pay it back with interest

Question 39

Cashier's Check

Answer 39

A draft in which the same bank is both drawer and drawee; it is drawn on bank's own funds

Question 40

Certified Check

Answer 40

A draft in which money is segregated out of an account and put in a separate account; bank stamps CERTIFIED on front

Question 41

Bank Draft

Answer 41

A draft that utilizes two banks; one is drawer, the other is a drawee

Question 42

Inland Draft

Answer 42

A domestic draft that is both drawn and payable within the U.S.

Question 43

Foreign Draft

Answer 43

An international draft that is either drawn or payable outside the U.S.

Question 44

Sight Draft

Answer 44

A draft payable immediately upon demand at the sight of drawee (Ex. Check has current or past date on it so you can take it to the bank and deposit it.)

Question 45

Time Draft

Answer 45

A draft payable on a fixed future date or certain number of days after date

Question 46

Trade Acceptance

Answer 46

A draft involving sales of goods

Question 47

In a Trade Acceptance, who is the drawer?

Answer 47

Seller

Question 48

In a Trade Acceptance, who is the payee?

Answer 48

Seller

Question 49

In a Trade Acceptance, who is the drawee?

Answer 49

Buyer

Question 50

How are order papers negotiated?

Answer 50

By endorsement and delivery (sign the back of the check and take it to the bank)

Question 51

How are bearer papers negotiated?

Answer 51

By delivery alone (take cash to the bank to deposit it; no signature needed)

Question 52

Where do you make an endorsement?

Answer 52

Along the trailing edge on the back of the instrument

Question 53

Allonge

Answer 53

Paper firmly attached to an instrument so as to become a part of it

Question 54

Who is primarily liable for payment on the instrument?

Answer 54

The maker of the note or the drawee/acceptor of a draft Maker: drawer; who made draft/note Drawee: bank

Question 55

Who is secondarily liable for payment on the instrument?

Answer 55

Endorsers or drawers - endorser: who first signed the check - drawer: who made the check

Question 56

What conditions need to be met for someone to be secondarily liable?

Answer 56

Presentment, Dishonor, or Notice of Dishonor

Question 57

Holder in Due Course (HDC)

Answer 57

A holder who has superior rights on instrument

Question 58

What qualifications are needed to be a HDC?

Answer 58

Taking the instrument on/before due date, in good faith, for value, and without notice of any defenses

Question 59

What are limited defenses for non-payment (in exception of a HDC)?

Answer 59

1. Ordinary Contract Defenses 2. Conditional Delivery 3. Payment 4. Theft 5. Fraud including execution of instrument 6. Improper completion 7. Non-Delivery

Question 60

What are universal defenses for non-payment (including a HDC)?

Answer 60

1. Minority 2. Fraud as to nature of instrument 3. Discharge in bankruptcy 4. Forgery