terminology

Question 1

what is “commercial paper?”

main issues in this topic

Answer 1

CP is governed by Articles 3 and 4 of the UCC

A commercial paper is a written instrument for the payment of money

Fundamental issues
– person with an instrument wants to get paid
– person obligated on the instrument does not want to pay
— person who pays the instrument will now want to recover the money from the person who was paid or someone else

Question 2

approach

Answer 2

(1) ID the type of paper

(2) ID the parties

(3) determine whether the instrument is negotiable

(4) determine whether the instrument was properly negotiated

(5) determine whether the transferee is a holder in due course

(6) determine the P’s cause of action, such as contract, warranty, tort, or not-properly-payable claims

(7) determine the D’s defenses

(8) if the D is liable, can the D pass liability onto another party

Question 3

Note

parties to a note

Answer 3

Note = promise to pay money

parties to a note =
(1) Maker – person who promises to pay [promisor/obligor’]

(2) payee – person entitled to payment [promisee]

Examples:
(1) certificate of deposit = note issued by a bank containing an acknowledgment of money received and a promise to repay

Question 4

Draft [bill of exchange]

Answer 4

draft = order to pay

parties to a draft =
(1) drawer – person ordering payment [person writing the check]
(2) drawee – person to make the payment [payor bank]
(3) payee – the person to receive the payment

examples:
- checks IF a bank is the drawee and the instrument is payable on demand

Question 5

types of checks

Answer 5

CHECK = a draft that is payable on demand and in which a bank is a drawee

(1) certified check = ordinary check which bank has accepted [i.e. agreed to pay]

(2) cashier’s check = a draft where drawer and drawee are the same bank

(3) teller’s check [draft drawn by one bank on another bank]

(4) traveller’s check