2nd QUARTER- BUSINESS LAW Exam 3

Question 1

document drawn in a special form which can be transferred from person to person as a substitute for money or as an instrument of credit.
Also called negotiable instrument

Answer 1

commercial paper

Question 2

classifications of commercial paper ??????

Answer 2

promises to pay
orders to pay
???????

Question 3

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
This is one example of commercial paper

Answer 3

PROMISSORY NOTE

Question 4

acknowledgement by a bank of receipt of money with an agreement of repayment

Answer 4

CERTIFICATE OF DEPOSIT (CD)

Question 5

here is an example of a CD

Answer 5

$1,000 CD with maturity date of 01/05 and interest of 6% at maturity date, bank will pay principle, plus interest

Question 6

person who executes promissory note (person who MAKES promise, a bank or person getting loan)

Answer 6

maker

Question 7

party to whom any negotiable instrument is made payable

Answer 7

payee

Question 8

written order signed by one person requiring the person to whom it is addressed to pay a particular sum of money, to order or bearer; on demand at a certain time.

Second example of commercial paper

Answer 8

draft

Question 9

types of orders to pay

Answer 9

Certified check
Cashier’s check 
Bank draft
Voucher check 
Traveler’s check

Question 10

ordinary check which an official of a bank has accepted by writing across the face of the check the word “certified” and signed.
• This makes the bank liable for the payment.
• The drawer is released from liability

Answer 10

certified check

Question 11

• Check drawn on a bank’s own funds
• Signed by a responsible bank official or a cashier
• Bank may use to pay its own obligation
• May be used by someone in lieu of their own personal check

Answer 11

cashier’s check

Question 12

• Check drawn by one bank or another
• Banks will keep a portion of their funds in other banks
• Bank can draw a check on these funds at will

Answer 12

bank draft

Question 13

• Checks with voucher attached

* Voucher lists items of an invoice being paid by check

Answer 13

voucher checks

Question 14

• Similar to cashier’s checks

* Required signature and countersignature by purchaser

Answer 14

traveler’s checks

Question 15

person who executes any draft or check

Answer 15

drawer

Question 16

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

Answer 16

drawee

Question 17

party to whom any negotiable instruments is made payable. Person that gets the money

Answer 17

payee

Question 18

REQUIREMENTS FOR NEGOTIABILITY

Answer 18

• Must be in writing and signed by the maker
• Contain an unconditional order or promise to pay a certain sum in money
• Payable on demand at a definite time
• Payable to “order” or to “bearer”
• Order paper or Bearer paper

Question 19

• A commercial paper made payable “the order of” some named party
• Word “order” or its equivalent must be used
• may be paid only to the person to whom it has been properly endorsed

Answer 19

order paper

Question 20

• A commercial paper made payable to any person in possession of it
• “Payable to bearer”

Answer 20

bearer paper

Question 21

act of transferring ownership of a negotiable instrument to another party

Answer 21

negotiation

Question 22

person who has possession of a delivered negotiable instrument

Answer 22

holder

Question 23

the signature or statement of purpose by the owner on the back of a negotiable instrument, which indicates future control of the instrument

Answer 23

ENDORSEMENT or INDORSEMENT

Question 24

the “payee” of a note or draft transferring the instrument to another party

Answer 24

ENDORSER or INDORSER

Question 25

person who becomes the “holder” of a negotiable instrument by endorsement which names him/her as the person to whom the instrument is negotiated

Answer 25

ENDORSEE or INDORSEE

Question 26

a type of endorsement having no words other than signature of endorser

Answer 26

blank endorsement

Question 27

endorsement which designates the particular person to whom payment is to be made (i.e. – pay to the order of)

Answer 27

special endorsement

Question 28

an endorsement which prevents the use of the instrument for anything except stated use (i.e. – for deposit only)

Answer 28

restrictive endorsement

Question 29

limits liability of endorser. Endorser signs the bill or promissory notes and adds; “without recourse”. This limits the endorser’s liability and endorsee accepts the liability

Answer 29

qualified endorsement

Question 30

person in possession of a negotiable instrument who accepts the negotiable instrument in good faith and for value; “innocent purchaser”

Answer 30

holder in due course

Question 31

What are the requirements of the holder in due course?

Answer 31

The Holder: • Must take instrument in good faith and for value • Must have no notice that instrument is overdue or has been dishonored • At time of negotiation, no notice of any defense against or adverse claim to the instrument

Question 32

What are the rights of the holder in due course?

Answer 32

* Right to collect amount due | * Right to be free from defense of no consideration

Question 33

liability for payment of negotiable instruments

Answer 33

* Requirements to qualify as a holder in due course | * Rights of a holder in due course

Question 34

transferor's warranties

Answer 34

* Transfer of commercial paper * Warrants existence of certain facts * Specified by UCC * Transferor entitled to enforce the instrument * All signatures genuine or authorized * Instrument has not been altered * Instrument not subject to defense or claim of any party * Transferor has no knowledge or insolvency proceedings with maker, acceptor, or drawer of unaccepted draft

Question 35

transfer of possessions, but not title of personal property by one party to another, under agreement EXAMPLE: Leaving a car with garage for repair Storing furniture in a warehouse Student borrowing a tuxedo

Answer 35

bailment

Question 36

party who gives up possession, but not title or property

Answer 36

bailor

Question 37

party who acquires possession, but not title of personal property

Answer 37

bailee

Question 38

those held to “normal” standard of care for bailed property

Answer 38

ordinary bailment

Question 39

those held to higher than normal standard of care for bailed property Such as: • Common carriers • Hotel keepers • Funeral directors

Answer 39

extraordinary bailment

Question 40

conditions of bailment

Answer 40

* Bailor delivers property to bailee * Bailee accepts property from bailor * Both parties agree that property will be returned to bailor

Question 41

types of bailment

Answer 41

* Sole benefit of bailor * Sole benefit of bailee * Mutual benefit

Question 42

* Bailment benefits only property owner * Bailee must exercise “slight care” * Liable only for gross negligence

Answer 42

sole benefit of bailor

Question 43

occurs when borrowing someone’s property | Bailee must exercise “great care”

Answer 43

sole benefit of bailee

Question 44

* Bailee renders a service * Charges for the service * Bailee must exercise “reasonable care under the circumstances”

Answer 44

mutual benefit

Question 45

Transports under special arrangements for a fee • Moving van • Delivery services • Funeral home A transports body for funeral home B

Answer 45

private carriers

Question 46

one that undertakes transport without discrimination for all who apply for service • Airline • Bus • Train

Answer 46

public carriers

Question 47

one who ships goods by a common carrier, (i.e. - forwarding funeral home).

Answer 47

consignor

Question 48

one to whom goods are shipped to by a common carrier

Answer 48

consignee

Question 49

contract between consignor and carrier Is receipt and contract existing between consignor and carrier? Is documentary evidence of title of goods?

Answer 49

bill of lading

Question 50

* Describing the freight for ID * States the name of the consignor * The terms of the contract for carriage * Directing location of delivery

Answer 50

elements of bill of lading

Question 51

person in possession of a COMMERCIAL check

Answer 51

bearer

Question 52

public carrier is the same as...

Answer 52

common carrier

Question 53

person in possession of an INSTRUMENT

Answer 53

holder