Types of Negotiable Instruments

Question 1

A instrument is a draft because

Answer 1

it is a 3 party instrument.

A 1) drawer ORDERS a 2) Drawee to pay a Fixed amount to the 3) Payee

Question 2

To qualify as a check

Answer 2

instrument must be payable on demand (unless it is postdated)

Question 3

A promissory note

Answer 3

is a 2 party instrument where one party PROMISES to pay a fixed party in money to a payee

Question 4

Trade acceptance is

Answer 4

a special type of draft. The seller is the drawer and the payee.

Question 5

How does a trade acceptance work?

Answer 5

seller extends credit to buyer by drawing a draft on the buyer then directing that buyer to pay a fixed amount on a specified date.

Question 6

Under the revised article 3 of UCC

Answer 6

there are 2 categories of negotiable instruments

1) promissory note
2) drafts

Question 7

What are examples of 3 party instruments requiring a drawee

Answer 7

sight drafts
checks
trade acceptance

Question 8

What are examples of 2 party instruments

Answer 8

Notes

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