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outline13 - NEGOTIABLE INSTRUMENTS A negotiable instrument...

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NEGOTIABLE INSTRUMENTS A negotiable instrument is a (1) written instrument, (2) signed by the maker or drawer of the instrument, (3) that contains an unconditional promise or order to pay (4) a fixed amount of money (with or without interest in a specified amount or at a specified rate) (5) on demand or at an exact future time (6) to a specific person , or to order , or to its bearer . Ch. 13: Negotiable Instruments - No. 1 Business Law Today: The Essentials (6th ed.)
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TYPES OF NEGOTIABLE INSTRUMENTS Draft: An unconditional order to pay ( e.g. , a check) by which the party creating the draft (the drawer ) orders another party (the drawee ), typically a bank, to pay money to a third party (the payee ). Time Draft: A draft payable at a time certain. Sight Draft: A draft payable on presentment. Trade Acceptance: A draft that is drawn by a seller of goods ordering the buyer to pay a specified sum of money to the seller, usually at a specified future time. The buyer accepts the draft by signing and returning it to the seller. Promissory Note: A written promise made by one person (the maker ) to pay a fixed sum of money to another person (the payee ) on demand or at a specified future time. Certificate of Deposit: A note by which a bank or similar financial institution acknowledges the receipt of money from a party and promises to repay the money, plus interest, to the party or the party’s designee, on a certain date. Ch. 13: Negotiable Instruments - No. 2 Business Law Today: The Essentials (6th ed.)
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TRANSFER OF INSTRUMENTS Assignment: Under general contract principles, a negotiable instrument may be transferred to an assignee , who then holds the instrument with all the rights of the assignor . Negotiation: Transfer of an instrument in such a form that the transferee becomes a holder , who has at least the same rights in the instrument as the transferor, and may have more rights than the transferor. Negotiating Order Instruments: The payee may negotiate an order instrument to a third party by an indorsement by the payee in favor of the third party. Order Instrument: A negotiable instrument that is payable “to the order of” an identified person or “to” an identifiable person “or order.” Negotiating Bearer Instruments: Unlike an order instrument, a bearer instrument need not be indorsed to transfer the payee’s rights to the transferee. All that is required is delivery to the new bearer. Ch. 13: Negotiable Instruments - No. 3 Business Law Today: The Essentials (6th ed.)
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Bearer Instrument: A negotiable instrument payable “to bearer” or to “cash,” rather than to an identifiable payee. INDORSEMENTS Indorsement: A signature, with or without additional words or statements ( e.g. , “for deposit only,” “payable to Jane White,” “payable from acct. # 000001,” etc.), made by the indorser in order to transfer her rights to the indorsee .
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