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Unformatted text preview: Commercial Paper I. Intro A. Basic idea of commercial paper Written instruments for payment of money Fundamental issues: 1. person with instrument wants to get paid 2. person obligated on instrument does not want to pay 3. person paid the instrument and now wants to recover the money from the person paid or someone else B. Approach 1. Identify the type of Paper (representation of money) 2. Identify the parties 3. Determine if the instrument is negotiable (form) 4. Determine if the instrument was properly negotiated (transfer) 5. Determine if the transferee is a holder in due course 6. Determine the Liability of the parties – general approach a. who is attempting to recover ? (P) b. who is allegedly liable? (D) c. What is the cause of action aserted by P? (contract, warranty, tort, not properly payable) d. What defenses to liability may be raised by D? e. If D is liable, to whom may liability be passed? II. Identify instrument and parties A. Note – 1. promise to pay money – a two party instrument 2. parties a. maker – promisor – person who promises to pay b. payee – promisee – person entitled to payment 3. Certificate of deposit – note issued by a financial institution a. financial institution acknowledges receipt of money, and b. financial institution is promising the payee/depositor to repay the money B. Draft 1. Order to pay – “an order to pay money” – a 3 party instrument 2. Parties – a. drawer – person ordering payment (writing the check) b. drawee – person to make the payment (like a bank) (also called payor bank) c. payee – person to receive the payment (cashing the check) 3. Check – type of draft a. Requirements – financial institution is the drawee, and payable on demand b. Types of checks • ordinary check – from business or individual • certified check – ordinary check which bank has accepted (agreed to pay) • Cashier’s check – drawer and drawee are same bank; person buying the check is the remitter • Teller’s check – check drawn by on bank on another bank; person buying the check is the remitter • Traveler’s check – demand instrument requiring countersignature by a person whose signature already appears on the instrument 4. Demand Draft – not signed by drawer but created with drawer’s authority so that third party is usually a seller in an internet or telephone transaction or when you pay bills over the telephone giving creditor your checking act #. III. Negotiability – refers to “form” of the instrument and determined at time of issuance. If it says “non-negotiable” then it’s non- negotiable (unless it’s a check). Neg is important bc a HDC holding a negotiable instrument will always get paid(despite defenses to not paying). If instrument is non-negotiable, doesn’t mean unenforceable, just treat is like a regular K (def apply) Elements of negotiability: A. In writing B. Signed by maker or drawer – any symbol is ok C. Unconditional promise or order to pay – must be more than mere iou 1. presumption of unconditional promise or order 2.2....
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This note was uploaded on 04/17/2008 for the course LAW ? taught by Professor Harmon during the Spring '08 term at Touro NY.
- Spring '08