Business Law - Chapter 13

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Business Law - Chapter 13
2013-12-09 21:44:24
Business Law

Chapter 13 - Negotiable Instruments
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  1. What are four types of negotiable instruments
    • Drafts
    • Checks
    • Promissory Notes
    • Certificates of Deposits
  2. Demand vs Time instruments
    • Demand instruments: payable on demand
    • Time instrument: payable at a future date
  3. Orders to pay versus promises to pay
    • Orders to pay: checks and drafts
    • promises to pay: promissory notes and CDs
  4. Requirements for an instrument to be negotiable
    • be in writting
    • signed by the maker or drawer
    • unconditional promise or order to pay
    • - payment cannot be expressly conditioned on the occurrence of an event and cannot be made subject to or governed by another contract
    • state a fixed amount of money
    • payable on demand
    • payable to order or bearer
  5. What are the different ways a negotiable instrument can be transfered
    • transfer by assignment
    • transfer by negotiation
    • endorsements
  6. define transfer by assignment
    gives the assignee only those rights that he assignor possessed
  7. Define transfer by negotiation
    • order instrument is negotiated by endorsement and delivery
    • a bearer instrument is negotiated by delivery only
  8. What are the four different types of endorsements of a negotiable instrument
    • Blank endorsement: do not specify an indorsee, consist of a mere signature
    • special endorsement: signed by indorser and identify the indorsee
    • qualified endorsement: "without recourse" indorser is not guaranteeing payment of the instrument
    • restrictive endorsement : "for deposit only" require the indorsee to comply with certain instructions
  9. Define holder in due course (HDC)
    a holder who, by meeting certain acquisition requirements takes an instrument free of most defenses and claims to which the transferor was subject
  10. What are the requirements to be an HDC
    • For value
    • in good faith
    • without notice: cannot be notified that the instrument is defective
  11. What is the shelter principal
    a holder who cannot qualify as an HDC has the rights of an HDC if the holder derives her or his title through an HDC, unless the holder engaged in fraud or illegality affecting the instrument
  12. Define signature liability of a negotiable instrument
    Every party who signs a negotiable instrument is either primarily or secondarily liable for payment of the instrument when it comes due
  13. Define primary liability(signature liability) for a negotiable instrument
    makers and acceptors are primarily liable
  14. Define secondary liability (signature liability) for a negotiable instrument and the requirements
    • drawers and endorsers
    • presentment is proper and timely
    • instrument is dishonored
    • received timely notice of dishonor
  15. Define transfer warranties of a negotiable instrument
    any person who transfers an instrument for consideration makes five warranties to subsequent transferees and holders
  16. Define presentment warranties of a negotiable instrument
    any person who presents an instrument for payment or acceptance makes three warranties to any person who in good faith pays or accepts the instrument
  17. What are universal defenses to negotiable instruments
    • forgery
    • fraud in the execution
    • material alteration
    • discharge in bankruptcy
    • minority
    • illegality, mentally incapacity, extreme duress
  18. what are personal defenses to negotiable instruments
    • breach of contract or breach of warranty
    • lack or failure of consideration
    • fraud in tehinducement
    • illegality and mental incapacity - if the contract is voidable
    • ordinary duress or undue influence that renders the contract voidable
  19. how are parties to a negotiable instrument discharged from liability?
    • pays the full amount due
    • other circumstances