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Flashcards in Commercial Paper: Intro Deck (7)
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Negotiable Instruments

Article 3 of UCC
- method of payment that eases transfer of funds
- contract's right to payment can be assigned, but original parties have defenses and rights
- separate the payment rights from the contract rights
Non-negotiable Instruments
- covered by contract law


Negotiable Instruments:
General Types

Order to Pay: 3 party instrument
(drawer, drawee, payee)
- Draft:
- Check
Promise to Pay: 2 party instrument
(maker, payee)
- Notes
- CD's


Negotiable Instruments:

- Seller = drawer, buyer = drawee,
seller or seller's bank = payee
Sight Draft: payable on demand upon issue and presentment
Time Draft: draft payable by the drawee at a specific time
Trade Acceptance: draft to pay purchase $ plus interest upon presentment to drawee acceptor


Negotiable Instruments:

Draft drawn on a bank payable on demand
Cashier's Check: drawer & drawee are same bank
Teller's Check: draft drawn by one bank on another
Traveler's Check: draft payable on demand, special signature.
Certified Check: drawee accepts primary obligation to pay


Negotiable Instruments:

Notes General:
Written promise by maker to pay money to another party or bearer.
Promissory Note:
- not payable on demand or within definite time to a specific payee (or order) or to the bearer.
CD's General:
- note made by a bank acknowledging that it has a deposit of funds payable to the holder


Negotiable Instruments:
Non-negotiable Instruments

Letters of Credit
Warehouse Receipts
Bills of Lading
Stocks & Bonds


Negotiable Instruments:

1. Written
2. Signed
3. Unconditional promise or order
4. Sum Certain in Money
5. Payable on Demand or at a Definite Time
6. Words of Negotiability: Order or Bearer
- Order
- identified person, agent, trust, etc.
- Bearer
- bearer, identified person or bearer, cash.

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