Commercial Paper Set #1 Flashcards Preview

FL Contracts & UCC3 Bar Exam 2020 > Commercial Paper Set #1 > Flashcards

Flashcards in Commercial Paper Set #1 Deck (15)
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commercial paper: law

UCC article 3 is the creation of uniform rules for the payment of obligations in forms other than cash. These non-cash forms of payment, known as negotiable instruments or commercial paper, have unique characteristics that convey rights from one party to another while creating legally enforceable obligations. Article 3 applies to notes and drafts. Article 3 applies only to negotiable instruments

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commercial paper: note

a note is a two-party instrument in which the maker promises to pay the payee a sum of money. The promissory instrument is generally evidence of an extension of credit; notes contain promises

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commercial paper: certificate of deposit

a two-party instrument, particular to banks, in which the bank acknowledges an amount of money and promises to repay that amount. A CD is only an Article 3 instrument if it is negotiable, which most are not.

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commercial paper: draft

a 3-party commercial paper in which the drawer orders a 2nd party (drawee or payor) to pay a sum of money to a 3rd party payee; contains orders: "to national bank, pay to the order of paula the sum of $100, signed, mark." Four types: check, traveler's check, teller's check, and cashier's check

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commercial paper: check

a type of draft: drawn on a bank and payable on demand

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commercial paper: traveler's check

a type of draft; must be "countersigned" by a person whose "specimen signature" appears on the traveler's check

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commercial paper: cashier's check

a type of draft; drawer and drawee are the same bank

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commercial paper: teller's check

type of draft; drawn by a bank on another bank or payable at or through a bank

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commercial paper: contradictory terms

when conflicting or contradictory terms exist within an instrument, handwritten terms take precedence over typed terms, and typed terms take precedence over printed terms, words over numbers

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Negotiability defined

1-unconditional; 2-promise or order to pay; 3-a fixed amount of money, w/ or w/o interest; 4-payable to order or bearer; 5-on demand or at a definite time; and 5-states no unauthorized undertaking or instruction.

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Unconditional instruments

Cannot expressly state a condition for payment, and cannot be subject to or governed by another writing. It can refer to another writing regarding collateral, prepayment, or acceleration; limit payment to a particular fund; require a countersignature or specimen signature; contain the statement that the holder is subject to claims and defenses of the original payee; recite consideration out of which the instrument arose.

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definite time: acceleration clause

"pay bearer $5 on 5/1/2014, or at my death if i die sooner" does not destroy negotiability

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definite time: extension clause

extensions at option of the maker, or that are automatic at the happening of an event are okay, if the extension is to a further definite time stated in the instrument , such as "pay bearer $5 on 8/2/2014, but if a uranus mission has been launched, payment may be made on 8/2/2015." An extension at the option of the holder is always permitted-but he may not exercise if maker objects & tenders payment

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permitted undertaking or instructions in negotiable instruments

1-an undertaking or power to give, maintain, or protect collateral; 2-an authorization or power to given to the holder to confess judgment or to realize on or dispose of collateral; and 3-a waiver of the benefit of a law that protects the obligor