Requisites of negotiability and Negotiation Flashcards
What is a negotiable instrument?
Singed writing that orders or promises payment of money, (notes, drafts and checks)
What is a note?
2 party instrument in which one party (maker) promises to pay a second (payee) a sum of money
What is a draft?
3 party instrument in which one party (drawer) orders a 2nd party (drawee/payor) to pay a sum of money to a 3rd party (payee)
What is a check?
draft drawn upon a bank and payable on demand. (money order; cashier’s check’ and teller’s check)
What happens if an instrument falls within the definition of both note and draft?
Can be enforced as either.
What are the requirements of a negotiable instrument?
- signed writing
- unconditional promise or order
- to pay fixed amount of money
- Payable to order or to bearer
- Payable on demand or at a definite time
- Contains no undertaking or instruction.
What are the requirements of a signed writing?
- can be made manually or mechanically, (name, word, symbol). May be typewritten or printed.
- writing the name of another person constitutes the signature of the writer if writer lacks authority to use the other’s name as long as person who pays the instrument acts in good faith
What are the requirements of the promise or order?
Order: written instruction to pay money signed by person giving the instruction
Promise: written undertaking to pay money signed by the person undertaking to pay
Negotiable instrument must be payable in all events .
When is a promise conditional?
- Contains an express condition to payment
- States that it is subject to or governed by another writing; or
- States that rights or obligations with respect to it are stated in another writing.
When is a promise Unconditional?
Reference to another writing - does not of itself make a promise or order conditional
Reference to another writing stating rights w.r.t collateral, prepayment or acceleration - does not of itself make a promise or order conditional
Pay a Fixed amount
Instrument is not payable with interest unless it specifies otherwise. Interest may be stated as a fixed or variable amt of money, or as a fixed or vairable rate.
What happens if instrument provides for interest but the amount cannot be ascertained from the description?
Interest is payable at the rate PAYABLE ON JUDGMENTS at the place and time interest first accrues
Payable in Money
Instrument must be payable in money and only money, and amt due must be ascertainable from the instrument.
-Instrument rendered non-negotiable if the obligor agrees to pay in goods or services, even as an alternative option
When is an instrument payable to bearer?
- states its payable to bearer or order of bearer
- does not state a payee
- states it is payable to cash; or
- indicates it is not payable to an identified person
If a check is not payable to bearer or order, but otherwise satisfies all the requirements for negotiabilty?
Is negotiable
When is an instrument payable to order?
If it is payable to the order of an identified person or to an identified person or order
what is an instrument contains BOTH order and bearer language?
The bearer language controls
Multiple Payees - alternatively (X or Y)
Payable to any of them, and may be negotiated, discharged, or enforced by any or all or them in possession of the instrument
Multiple Payees - jointly (X and Y)
Payable to all of them, and may be negotiated, discharged, or enforced only by all of them; neither, acting alone, can be the holder of the instrument.
Instrument ambiguous as to payable to persons alternatively or jointly
Payable to persons alternatively
When is an instrument payable on demand?
if it states that it is payable on demand or at sight, otherwise indicates that it is payable at the will of the holder, or it does not state any time for payment.
When is instrument payable at a definite time?
If payable
- at the end of a definite period of time (90 days)
- At a fixed date; or
- at a time readily ascertainable at the time of issue, even if subject to rights of:
- prepayment;
- acceleration;
- extension at the holder’s option; or
- extension to a further definite time at the maker’s option or automatically upon or after a specified act or event
What happens if instrument payable at a fixed date and payable on demand before the fixed date?
Payable on demand until the fixed date, and if no demand has yet been made, becomes payable at a definite time on the fixed date
If an instrument is payable ONLY UPON THE HAPPENING OF AN EVENT?
Non-negotiable, even if that even is certain to happen, SO LONG AS THE TIME IS UNCERTAIN
