week 6

Question 1

a person in possession of a negotiable instrument

Answer 1

bearer

Question 2

negotiable instrument payable to bear or cash

-payable to possessor or inanimate objects

Answer 2

bearer paper

Question 3

having no words other than the signature of the endorse

Answer 3

blank endorsement

Question 4

a check drawn on a banks own funds and and signed by a responsible bank official

Answer 4

cashiers check

Question 5

a check for which the bank assumes that the drawer has sufficient funds to make payment

Answer 5

certified check

Question 6

the acknowledgment by a bank of a receipt of money with an agreement of repayment

Answer 6

certificate of deposit

Question 7

an order by a deposited on the bank to pay a sum of money to a payee

Answer 7

check

Question 8

a written order by one person directing another to pay a sum of money to a third person

Answer 8

draft

Question 9

the person, company, or financial institution ordered to pay a draft

Answer 9

drawee

Question 10

one in possession of a negotiable instrument

Answer 10

holder

Question 11

named holder of endorsed negotiable instrument

Answer 11

indorsee

Question 12

the signature of holder on the back of a negotiable instrument with any directions or limitations

Answer 12

endorsement

Question 13

a person who signs his/her name on the back of an instrument

Answer 13

indorser

Question 14

the transfer of a negotiable instrument from the creator of a negotiable to a payee/holder
-creator delivering instrument to payee

Answer 14

issue

Question 15

the party who executes a promissory note

Answer 15

maker

Question 16

a writing drawn in a special form which can be transferred as a substitute for money or as an instrument of credit

Answer 16

negotiable instrument

Question 17

the act of transferring ownership of a negotiable instrument to another party

Answer 17

negotiation

Question 18

negotiable instrument made payable to the order of a named party; the word order or its equivalent must be used
-payable to named person

Answer 18

order paper

Question 19

the party to whom any negotiable instrument is made payable

Answer 19

payee

Question 20

a negotiable instrument containing a promise to pay

Answer 20

promissory note

Question 21

an endorsement which limits the liability of the indorser

Answer 21

qualified indorsement

Question 22

an endorsement that restricts the use of a negotiable instrument

Answer 22

restrictive endorsement

Question 23

an endorsement which designates the particular person to whom payment is to be made

Answer 23

special endorsement

Question 24

• negotiable instrument and commercial paper mean same thing
• writing in special form
• can be transferred as substitute for money
• act as a credit device

Answer 24

commercial paper

Question 25

- promissory note - certificate of deposit - check - draft

Answer 25

classification of negotiable instruments

Question 26

promises to pay (2) - promise by one party to - pay another party - two party paper

Answer 26

1. promissory notes | 2. certificates of deposit

Question 27

parties to two party paper

Answer 27

- notes and certificates of deposit - maker; promising to make the payment - payee; to whom payment is going to be made

Question 28

made by financial institution | -banks and savings and loans

Answer 28

certificate of deposit

Question 29

- drafts and checks - order by one party directed to - -another party to - pay a third party - three party paper

Answer 29

classifications of orders to pay

Question 30

- drafts and checks - drawer - drawee - payee

Answer 30

parties to three party paper

Question 31

drafts - drawer directs a drawee to pay a payee - checks - drawee is a financial institution

Answer 31

three party paper

Question 32

- certified check - check is accepted by drawee - cashiers check - drawee is same financial institution as drawer

Answer 32

special checks

Question 33

1. be in writing 2. be signed by a maker or drawer 3. an unconditional promise or order to pay 4. state a fixed amount of money - sum certain in money 5. payable at a definite time - on demand 6. magic words of negotiability (order or bearer)

Answer 33

requirements for negotiability

Question 34

1. first you must have a writing signed by maker or drawer and unconditional promise to pay a sum certain in money 2. next you need a definite date and magic words of negotiablitiy, when you have these 6 things your documents ok 3. its negotiable, commercial paper

Answer 34

ode to negotiability

Question 35

- bearer paper | - language; pay to order of, bearers cash, sight, can of sardines

Answer 35

creation of bearer paper

Question 36

- ID person | - must contain magic word, order

Answer 36

creation of order paper

Question 37

-bearer transfer possession -order transfer possession and endorsement

Answer 37

negotiation of paper

Question 38

- -necessary to negotiate order paper - endorse - -transfer possession - compare bearer paper - negotiate by transfer of possession

Answer 38

endorsements

Question 39

1. blank endorsement - having no words other than the signature of the endorser - paper is now bearer paper 2. special endorsement - pay to order of PIMS (example) - if originally bearer paper; no signature required - payee must sign if order paper 3. qualified endorsement - without recourse - avoid some liability on instrument - endorser still has some liability 4. restrictive endorsement - for deposit only; transfer right to bank - pay smith only; transfer to smith who may negotiate to another person

Answer 39

form of endorsement

Question 40

1. implied by law upon all endorsers - all signatures on instrument are authentic and authorized - instrument hasn't been altered - instrument isn't subjected to defenses or claim which can be asserted against the warrantor - endorsor is the person entitled to enforce the instrument - endorsor has no knowledge of any insolvency proceedings with respect to the maker, acceptor, and the drawer

Answer 40

warranties of endorser

Question 41

- person expected to make payment - makers of notes and cds - drawees of drafts and checks

Answer 41

parties with primary liability

Question 42

- parties only liable if primary party doesnt pay - liability requires the parties signature on the instrument - endorsers of notes and cds - endorsers and drawers of checks and drafts

Answer 42

parties with secondary liability

Question 43

1. real defenses - fraud in execution - forgery - minority - material alteration - serious duress - discharge in bankruptcy

Answer 43

defenses of nonpayment