Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Business Law II > Exam 1: Negotiable Instruments > Flashcards

Exam 1: Negotiable Instruments Flashcards

1
Q

What articles of the UCC govern negotiable instruments?

A

Article 3 - negotiable instruments

Article 4 - banking

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What is a negotiable instrument?

A

“a signed writing containing an unconditional promise to pay an exact sum of money”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the parties to a draft?

A

Drawer, Drawee and Payee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What defines a check?

A

The Drawee is a financial institution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Cashier’s Check

A

A check when the financial institution is both a Drawer and Drawee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Trade Acceptance

A

Seller is drawer and payee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Promissory Notes Parties

A

Maker (Promisor)

Bearer (Promisee)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Certificate of Deposit

A

Promissory Note where the Maker is a financial institution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Requirements for Negotiability

A 
Written
Unconditional commitment to pay
Signed by the maker or the drawer
Sum certain payable in money
Definite time or payable on Demand
Order of someone or bearer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What rules when handwritten and typewritten are present

A

Handwritten

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What rules when words and numbers disagree

A

Words Prevail!

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What interest rate applies if the instrument says with interest and does not specify?

A

Judgement rate: the rate of interest fixed by the state statute that applies to a monetary judgement awarded by the court

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Transfer by negotiation creates a holder who at the very least

A

received the rights in the instrument of a previous possessor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Holder is

A

anyone who possess instrument with all necessary endorsements

  • payable to bearer: possessor is holder
  • payable to specific person: specific person is holder w/o endorsement
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is an Order Instrument?

A

Either:

  • an instrument that is payable to a certain person (an order instrument) OR
  • Orders to Pay (drafts) [vs. promises to pay]
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Negotiating Order Instruments

A

requires endorsement and delivery

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Negotiating Bearer Instruments

A

requires delivery only

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What is a Bearer Instrument?

A

Payable to anyone who properly possesses the instrument {Bare of endorsement need}

19
Q

Blank endorsement

A

Signature without additional words

-converts a order instrument into a bearer instrument

20
Q

Special endorsement

A

Payable to a specific person {human life is special, people are special}

21
Q

Qualified Endorsement

A

Signature with the words “Without Recourse”

-nullifies the transfer warranty

22
Q

Restrictive Endorsements

A

Restricts what can happen to the check - “includes specific instructions regarding the funds involved or states a condition to the right of the indorsee to receive payment”

  • For Deposit/Collection Only
  • Pay to BLANK as agent for BLANK
  • Pay to BLANK in trust for BLANK
23
Q

Do misspelled names affect negotiability

A

Nope as long as the misspelling is within reason

24
Q

Instruments Payable to Legal Entities

A

Negotiable by authorized representative of the entity

25
Q

Alternative Payees: BLANK or BLANK

A

either payee may indorse

26
Q

Joint Payees: BLANK and BLANK

A

both must endorse which provided evidence that at a minimum the other party knew about payment

27
Q

Multiple payee ambiguity: Pay BLANK BLANK 2

A

presumed alternative payees, meaning “or”

28
Q

Holder in Due Course (HDC) requirements

A
  • Takes for Value
  • Takes in Good Faith
  • Takes without Notice of Payment or a Defect in the Instrument (a reasonable person would be on notice of defect)
29
Q

Holder can take for value by:

A
  • Performing the instrument’s promise
  • Acquiring a security interest or other lien in the instrument
  • Taking instrument in payment for an antecedent debt
  • Giving a negotiable as payment
30
Q

“Good faith” is

A

honesty in fact and the observance of reasonable commercial standards of fair dealing.

31
Q

Holder takes the instrument with notice if she knows/has reason to know:

A
  • instrument is overdue
  • instrument has been dishonored
  • actual knowledge or any suspicious event
  • that a claim or defense exists
  • very irregular, incomplete or bears such evidence of forgery
32
Q

Shelter Principle

A

Person is not an HDC but derives title through HDC

33
Q

What is discharge of a negotiable instrument mean?

A

terminate the liability associated with an instrument

34
Q

Discharge from liability on an instrument can occur by:

A
  • Payment
  • Cancellation or Surrender
  • Reacquisition
  • Impairment of Collateral
35
Q

Two kinds of liability related to negotiable instruments

A

Signature Liability

Warranty Liability

36
Q

What is signature liability?

A

liability that arises from a party’s signature on an instrument

37
Q

What is warranty liability?

A

Liability that arises by operation of law and may be implied /applied to a party who handles an instrument but does not sign the instrument

38
Q

What kind of liability do Makers and Acceptors have for their signature?

A

Primary liability - unconditional

39
Q

What kind of liability to Drawers/Endorsers have for their signature?

A

Secondary liability - only kicks in after the instrument is dishonored

40
Q

Explain Maker’s Primary Liability

A
  • Promises to pay the note

- Obligated to pay terms of instrument at the time of signing

41
Q

Explain Acceptors’ Primary Liability

A

-Drawee promises to pay an instrument when presented for payment
> Certified Check
>Also known as Guaranteed funds/payment

42
Q

What are the requirements for Secondary Liability to apply?

A
  • Proper Presentment (must be timely)
  • Dishonor (the instrument is not paid)
  • Proper Notice (reasonable manner)
43
Q

What do Accommodation Parties do?

A

Sign instruments to lend name as credit to another party on the instrument (liability is identical to the party who is accommodated)

Business Law II (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions