Business Law- Chapter 22 Flashcards Preview

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Flashcards in Business Law- Chapter 22 Deck (36):
1

Negotiable Instrument

A special form of contract that satisfies the requirements established by Article 3 of the UCC.

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Article 3 of the UCC

A model code that establishes rules for the creation of, transfer of, enforcement of, and liability on negotiable instruments.

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Revised Article 3

A comprehensive revision of the UCC law of negotiable instruments that reflects modern commercial practices.

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Draft

A three-party instument that is an unconditional written order by one party that orders a second party to pay money to a third party.

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Drawer of a Draft

The party who writes an order for a draft.

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Drawee of a Draft

The party who must pay the money stated in a draft.

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Payee of a Draft

The party who receives the money from a draft.

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Time Draft

A draft payable at a designated future date.

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Sight Draft

A draft payable on sight.

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Trade Acceptance

A sight draft that arises when credit is extended (by a seller to a buyer) with the sale of goods. The seller is both the drawer and the payee, and the buyer is the drawee.

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Check

A distinct form of draft drawn on a financial institution and payable on demand.

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Drawer of a Check

The checking account holder and writer of a check.

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Drawee of a check

The financial institution where the drawer of a check has his or her account.

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Payee of a Check

The party to whom a check is written.

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Promissory Note

A two-party negotiable instrument that is an unconditional written promise by one party to pay money to another party.

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Maker of a Note

The party who makes a promise to pay (borrower)

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Payee of a Note

The party to whom a promise to pay is made (lender)

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Time Note

A note payable at a specific time.

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Demand Note

A note payable on demand.

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Collateral

Security against repayment of a note that lenders sometimes require; can be a car, a house, or other property.

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Certificate of Deposit

A two-party negotiable instrument that is a special form of note created when a depositor deposits money at a financial institution in exchange for the institution's promise to pay back the amount of the deposit plus an agreed-upon rate of interest upon the expiration of a set time period agreed upon by the parties.

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Maker of a CD

The financial institution that issues a CD (borrower)

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Payee of a CD

The party to whom a CD is made payable; usually the depositor (lender)

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Permanency Requirement

A requirement of negotiable instruments that says they must be in a permanent state, such as written on ordinary paper.

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Portability Requirement

A requirement which states that a negotiable instrument must be signed by the drawer or maker. Any symbol executed or adopted by a party with a present intent to authenticate a writing qualifies as her signature.

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Unconditional Promise or Order to Pay Requirement

A requirement that says a negotiable instrument must contain either an unconditional promise to ay (note or CD) or an unconditional order to pay (draft or check)

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Order to Pay

A drawer's unconditional order to a drawee to pay a payee.

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Promise to Pay

A maker's (borrower's) unconditional and affirmative undertaking to repay a debt to a payee (lender).

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Unconditional

Not conditional or limited. Promises to pay and orders to pay must be unconditional in order for them to be negotiable.

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Fixed Amount of Money

A requirement that a negotiable instument contain a promise or an order to pay a fixed amount of money.

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Fixed Amount Requirement

A requirement of a negotiable instrument that ensures that the value of the instrument can be determined with certainty.

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Money

A "medium of exchange authorized or adopted by a domestic or foreign government"

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Payable on Demand or at a Definite Time Requirement

A requirement that a negotiable instrument be payable either on demand or at a definite time.

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Demand Instrument

An instrument payable on demand.

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TIme Instrument

An instrument payable at a fixed date, on or before a stated date, at a fixed period after sight, or at a time readily ascertainable when the promise or order is issued.

36

Nonnegotiable Contract

A contract that fails to meet the requirements of a negotiable instrument and therefore is not subject to the provisions of UCC Article 3.