LAW 301 CH 5, 6, &7 Flashcards
Finals (26 cards)
What is a ‘Negotiable Instrument’?
CH5
A Negotiable Instrument is that document that includes a ‘promise to pay’ a certain amount of money to the bearer of the document.
Its a mode of transferring a debt from one person to another.
Negotiable Instruments are always in written form.
EX of NI: a cheque, a promissory note, a bill of exchange.
ًWhat are the Functions of Negotiable Instruments
CH5
- Substitute for money
- Credit device
- Record-keeping device
Most purchases by businesses and many individuals are made by negotiable instruments instead of cash.
What are the Characteristics of Negotiable Instruments?
CH5
- **Freely transferrable: **The property in a negotiable instrument gets transferred by a simple process of mere delivery if it is payable to bearer, endorsement and delivery or payable to order.
- **Recovery: **One can sue upon the instrument in his own name.
-
Presumption as to considerations:
These instruments are presumed to have been:
made,
drawn,
accepted,
endorsed,
negotiated
or transferred for consideration. -
Payable to order or bearer:
It must be payable either to order or bearer.
Holder’s title free from all defects: The holder (one who acquires the instrument in good faith and for consideration) in due course gets title free from all defects.
Presumption as to holder-:Every holder of negotiable instrument is presumed to be holder in due course.
What is presumed about every holder of a Negotiable Instrument?
CH5
Every holder is presumed to be a holder in due course.
What is the significance of the holder’s title in Negotiable Instruments?
CH5
The holder in due course gets title free from all defects.
What does ‘payable to order or bearer’ imply for a Negotiable Instrument?
CH5
It must be payable either to order or bearer.
What is the presumption as to considerations for Negotiable Instruments?
CH5
These instruments are presumed to have been made, drawn, accepted, endorsed, negotiated or transferred for consideration.
What is meant by recovery concerning Negotiable Instruments?
CH5
One can sue upon the instrument in his own name.
What does it mean for a Negotiable Instrument to be freely transferrable?
CH5
The property in a negotiable instrument gets transferred by mere delivery if payable to bearer, or by endorsement and delivery if payable to order.
Give examples of Negotiable Instruments.
CH5
- Cheque
- Promissory note
- Bill of exchange
These are common forms of negotiable instruments used in transactions.
Under Instruments Negotiable by Statute: What is the ‘Promissory Notes’
CH5
How many answer points?
3 answer points
- a promissory note is an instrument in writing.
- It contains an unconditional undertaking which is signed by the maker to pay of certain sum of money to the order of certain person, or to the bearer of the instruments.
- The person, who makes the promissory note, promises to pay and is called the maker, and the person to whom the payment is to be mode is called the payee.
What Are the Essential Features of a Promissory Note?
CH5
How many features
6 features:
1. The promise must be in writing.
2. The promise must be signed by the maker or payer.
3. The promise must be unconditional.
4. The amount to be paid must be definite in terms of money.
5. It must be payable on demand or at a fixed or determinable future date.
6. It must be payable to a definite person. The Payee must be certain.
There are two parties a promissory note,
Maker
Payee
explain the
CHEQUE شيكو
0ᴗ0
CH5
A cheque is a bill of exchange drawn on a specified banker. It is expressed to be payable otherwise than on demand.
What are Essentials features of aشيكو
CH5
- In writing
- Express order to pay
- Definite and unconditional order
- Signed by drawer
- Order to pay certain amount
- Payable on demand
Parties are:
Drawer:The maker of a bill of exchange.
Drawee: The person directed to pay the money by the drawer.
Payee: To whom or to whose order the money ore directed to be paid by the instruments. The person named in the instrument only.
Ways to Transfer a negotiable instrument?
CH6
The most important feature of the negotiable instrument is that it can be freely transferred, which is possible in two ways, i.e.
negotiation and assignment.
↑assignment
↓negotiation
What does it mean to Transfer a negotiable instrument by negotiation?
CH6
How many answer points?
Answer points are 3
- means a transfer of possession, whether voluntary or involuntary, of an instrument by a person other than the issuer to a person who thereby becomes its holder.
- Except for negotiation by a remitter, if an instrument is payable to an identified person, negotiation requires transfer of possession of the instrument and its endorsement by the holder.
- If an instrument is payable to bearer, it may be negotiated by transfer of possession alone.
What does it mean to Transfer a negotiable instrument by Assignment?
CH6
- Assignment takes place where the holder of an instrument transfers it to another so as to confer a right on the transferee to receive the payment of the instrument.
.
. - All negotiable instruments are chose in action and as such are transferable by assignment without endorsement.
-Assignment of a negotiable instrument is effected by writing without endorsement.
.
. - The main feature of assignment is that the assignee obtains the right of the assignor.
-Therefore if the assignor’s title is defective assignee’s title will also be defective.
What is endorsements
CH6
مش من اللي علينا بس بتهيقلي محتاجن نفهمها
An endorsement is when someone signs a check (or another financial paper) to give the money or rights to someone else.
Usually, the person signs on the back of the check.
Even if they sign somewhere else, like on a separate sheet of paper called an allonge, it still counts.
Example:
If you get a check made out to you and you sign the back and give it to your friend, your signature (endorsement) lets your friend take the money.
In short:
Endorsing a check = Giving your approval to transfer it to someone else.
Types of Endorsements?
CH6
State how many types first
6 types
-
Blank:
Does not specify a particular endorsee.
This endorsement creates bearer paper. -
Special:
Specifies the person to whom the endorser intends the instrument to be payable.
This endorsement creates order paper.
-** Unqualified:**
Does not disclaim or limit liability.
The endorsee is liable on the instrument if it is not paid by the maker, acceptor, or drawer.
Qualified:
Disclaims or limits the liability of the indorsee. There are two types:
1. Special qualified indorsement .
2. Blank qualified indorsement .
Nonrestrictive:
No instructions or conditions attached to the payment of funds .
Restrictive:
Conditions or instructions restrict the indorsee’s rights. There are four types:
1. Conditional indorsement
2. Indorsement prohibiting further indorsement
3. Indorsement for deposit or collection
4. Indorsement in trust
What are the special types of checks?
CH7
6 types:
* Personal Check
* Bearer Check
* Certified Check
* Cashier’s Check
* Travelers Check
* Money Order
Personal Check?
CH7
Personal Check: A personal check is payable only to the individual who is named on the check.
The account holder is responsible for the available funds to cover the amount of the check.
Personal checks are the most common check in the world .
Bearer Check?
CH7
Bearer Check: This check is payable to anyone who presents the check. The check can be marked “cash,” without naming anyone in particular.
- This means that the person in possession of the check can take it into the paying bank and receive the money without having to bank the check into their own personal account.
Certified Check?
CH7
Certified Check: A certified check is issued by a bank after it has determined that there are enough funds in the owner’s account to cover the amount of the check.
.
.
The bank verifies the necessary funds and that the signature on the check is genuine.
.
.
The bank will withdraw the amount of the check out of the owner’s bank account and hold it to ensure the check will be paid out.
Cashier’s Check?
CH7
Cashier’s Check: Cashier’s checks are issued by banks. The promise to pay is **made by **the bank, not the person using the check. This type of check is guaranteed and is often treated the same as cash.
.
.
The bank will debit your account or you can pay in cash for the amount of the check.
The check is then written by the financial institution and signed by the institution’s cashier or manager.
This type of check is usually used to pay out loans to a customer or a third party.
This check is** also known** as an official check, treasurer’s check or manager’s check.
