20-24 Negotiable Instruments Flashcards by Andee Zheng

Unauthorized change or completion of negotiable instrument to modify obligation of a party

Alteration

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Liability without conditions for commercial paper that is due

Primary liability

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Liability for a negotiable instrument that has been presented, dishonored, and notice of dishonor given

Secondary liability

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Demand for acceptance or payment of commercial paper

Presentment

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When a presentment is made, but acceptance or payment not yet made

Dishonor

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The drawee bank

Payor bank

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Not all payments on instrument fully made and not all made by due date

Uncured default

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Holder subsequent to holder in due course

Holder through a holder in due course

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Rule giving rights of holder in due course

Shelter principle

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Certification of notice of dishonor by authorized official

Protest

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Goods or services primarily for personal, family, or household use

Consumer goods or services

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Claim by the party being sued against the party suing

Setoff

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Defense that cannot be used against a holder in due course

Limited or personal defense

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Defense against any holder

Universal or real defense

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The act of transferring ownership of negotiable instrument, by indorsement, delivery, or physical transfer

Negotiation

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Signature or statement of purpose by the owner, signature of the payee or other holder, placed on the back of a negotiable instrument that indicates future control of instrument

Indorsement

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Left side of front of check

Trailing edge

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Paper so firmly attached to an instrument as to become part of it

Allonge

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the handwritten signature of the payee on the back of a check
indorsement that does not state to whom the instrument is to be paid
having no words other than the signature of the indorser

Blank indorsement

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An indorsement which designates the particular person to whom payment is to be made

Special indorsement

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An indorsement which limits the liability of the indorser

Qualified indorsement

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An indorsement which prevents / limits the use of the funds for anything except the stated purpose
“For Deposit Only”

Restrictive indorsement

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Bank receiving check for deposit

Depository bank

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Act indicating intention to destroy the validity of an instrument

Cancellation

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Unilateral act of holder giving up rights in the instrument or against a party to it

Renunciation

An order by a depositor requesting a bank not to pay on a check previously issued

Stop payment order

Check presented more than 6 months after its date

Stale check

Check which has been paid by the bank and returned to the drawer for record-keeping

Canceled check

Check the drawee bank refuses to pay for reasons such as insufficient funds or closed accounts

Bad check

A check not paid by the bank when properly presented

Dishonored check

Check drawn prior to its date

Postdated check

Pre-printed instrument in fixed amount requiring signature and countersignature

Traveler’s check

Check with voucher attached

Voucher check

- an order by a depositor on the bank to pay a sum of money to a payee - draft drawn on a bank and payable on demand - piece of commercial paper drawn on funds in a bank account and payable on demand

Check

- an ordinary check which an official of the bank has accepted by writing across the face of the check the word “certified” or some similar word, and signed - a check for which the bank assures that the drawer has sufficient funds to make payment - a check which carries the guarantee of the bank that sufficient funds are available to pay the check when it is presented

Certified check

A check draw on a bank’s own funds and signed by a responsible bank official or cashier

Cashier’s check

- check drawn by one bank on another bank in which it has funds on deposit

Bank draft (teller’s check)

Sealed, written contract obligation with essentials of note

Bond

Bond with detachable individual coupons representing interest payments

Coupon bond

Bond payable to specific person, whose name is recorded by issuer

Registered bond

Note secured by personal property

Collateral note

Note secured by mortgage on real estate

Real estate mortgage note

Unsecured bond or note issued by a business

Debenture

Acknowledgement by bank of receipt of money with engagement to repay it with interest

Certificate of deposit (CD)

Written order signed by one person requiring the person to who addressed to pay a particular sum of money, to order or to bearer, on demand or at a certain time

Drafts

Draft drawn in one state an payable in the same or another state

Inland draft

Draft payable upon presentation of draft’s holder

Sight draft

Draft payable a certain number of days or months after date or presentation

Time draft

Drawee’s signed agreement to pay draft

Acceptance

Draft drawn by seller on purchaser of goods and accepted by purchaser

Trade acceptance

Instrument issued by business indicating payee may receive financial instrument’s indicated amount

Money order

Transferability

Negotiability

First delivery of negotiable instrument by maker or drawer to give rights to another

Issue

Intentional transfer of possession and control of something

Delivery

EFTs begun at retailers when customers pay for goods or services

Point of sale system (POS)

Automatic deposit of funds to an account

Preauthorized credit

EFT terminal that performs routine banking services

Automated teller machine (ATM)

-document of payment, such as a check - a writing drawn in a special form which can be transferred from person to person as a substitute for money or as an instrument of credit

Commercial paper Negotiable instrument

Rules applied by courts set up by merchants in early England, prior to 1400

Law merchant

The act of transferring ownership of negotiable instrument to another party

Negotiation

- a person in possession of a NI who accepts the NI in good faith and for value - person who acquires rights superior to original owner - holder for value and in good faith with no knowledge of dishonor, defenses, or claims

Holder in due course

Commercial paper made payable “to the order of” some named party

Order paper

Commercial paper payable to any person in possession of it, the bearer

Bearer paper

Written order by one person direction another person to pay a sum of money to a third person

Draft (bill of exchange)

- NI containing a promise to pay - an unconditional promise in writing made by one party to another, signed by the maker, engaging to pay on demand or at a particular time, a particular sum of money to order or to bearer

Promissory note

The party to whom any NI is made payable

Payee

- the person who executes any draft - a personal (depositor) who signs a check, ordering a payment to be made

Drawer

The person, company, or financial institution ordered to make a payment on a check or draft

Drawee

Person who agrees to pay a draft, receive goods, or assent to an order

Acceptor

Automatic deduction of bill payment from checking account

Pre authorized debit

Shortening a check’s trip from the payee to the drawee bank and then the drawer

Check truncation

Fund transfer initiated electronically, telephonically, or by computer

Electronic funds transfer (EFT)

Person who executes, signs, or promises to pay on a promissory note

Maker

- person in possession of a NI - payee of an instrument made payable to whoever is in possession of the instrument

Bearer

- person in possession of instrument payable to bearer - person in possession of a delivered NI

Holder

- payee of note or draft transferring the instrument to another party - person who indorses a NI - person whose name is written on the back of an NI

Indorser

- named holder of indorsed NI - person who becomes the holder of a NI by indorsement which names him/her as the person to whom the instrument is negotiated

Indorsee

20-24 Negotiable Instruments Flashcards

(77 cards)