R7 Flashcards
Items that are NOT covered under UCC Article 3
- bills of lading
- warehouse receipts
- bonds
- stocks
Note
- a promise to pay
- maker = one who owes the money
- payee/bearer = one to whom payment is due
Is a CD a draft or a note?
a note
Draft
- order for third party to pay
- drawer = one who orders the payment
- drawee = one who is ordered to pay
- payee = one to whom payment is due
Check
- special type of draft
- drawee is a bank
- payable on demand
Trade Acceptances
*type of draft
Demand vs Time Instruments
- demand = at any time
* time instrument = maturity date
Does the UCC apply to money?
No
Requirements for Negotiability
- written
- signed by the maker or drawer
- contain an unconditional promise or an order to pay
- fixed amount of money (legal tender)
- payable on demand or at a definite time
- payable to order or to bearer
* checks are the one exception to 6
Do checks have to have the “magic words”?
No
Can power of attorney be used to sign negotiable instruments?
Yes
Conditions that Destroy Negotiability for Promise or Order
- cannot be subject to or governed by another agreement
2. no express conditions (if this happens then I will pay)
On which side of the instrument is negotiability determined?
the front
Do acceleration clauses destroy negotiability?
No; could use death (usually can’t) to accelerate payment
Do extension clauses destroy negotiability?
No
Authorized Promises that DO NOT destroy negotiability
- pay legal fees
- waivers of the right to jury trial
- pay a prepayment penalty
Rules of Construction
words control figures
Can negotiable instruments involve money and goods/services?
No, money only
Negotiation for Becoming a Holder
bearer paper = delivery
order paper = delivery & proper endorsement
Types of Endorsements
- Special (names a specific party) (order paper)
- Blank (signs name) (bearer paper)
- Qualified (without recourse)
- Restrictive
Are endorsers liable by contract to be guarantors of payment?
Yes, they are secondarily liable
Requirements to be an HDC
takes paper:
- with value
- in good faith
- without notice of any defenses to or claims of ownership
Does an executory promise count as value?
No
Facts that do not constitute notice to invalidate HDC status
- antedated or postdated
2. purchase at a discount