Chapter 26

Chapter 26 - Chapter 26: Form and Content BUL 3350- Chapter...

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Unformatted text preview: Chapter 26: Form and Content BUL 3350- Chapter 26 1 Topics Covered in this Chapter A. Negotiability B. Types of Negotiable Instruments C. Formal Requirements of Negotiable C. Instruments Instruments BUL 3350- Chapter 26 2 Negotiability Negotiability Rule – invests instruments with a high degree of marketability and commercial utility by conferring upon certain good faith transferees immunity from most defenses to the instrument. defenses Formal Requirements – negotiability is Formal wholly a matter of form, and all the requirements for negotiability must be met within the four corners of the instrument. instrument. BUL 3350- Chapter 26 3 Types of Negotiable Instruments Orders to Pay • Drafts – involves three parties: a drawer orders a Drafts drawee to pay a fixed amount of money to a payee. drawee • Checks – a specialized form of draft that is drawn Checks on a bank and payable on demand; the drawer orders the drawee (bank) to pay the payee on demand (upon the request of the holder). demand Promises to Pay • Notes – a written promise by a maker (issuer) to Notes pay a payee. pay • Certificates of Deposit – a specialized form of note Certificates that is given by a bank or thrift association. that BUL 3350- Chapter 26 4 Draft Two years from date pay to the order of Perry Payee $50,000 Fifty Thousand . . . Dollars St. Louis, Missouri May 1, 1996 To: DEBRA DRAWEE 50 Main St. Louisville, Kentucky (Signed) Donald Drawer DONALD DRAWER BUL 3350- Chapter 26 5 Check Matthew Charles 123 Anystreet Rd. Anytown, NC 21234 No. Feb.1 2000 $500.00 DOLLARS 12-28 710 Pay to the order of Five Hundred and no/100 Lilli­Marie Justin Rams Trust and Savings Bank Chicago, Illinois i HARRIS BANK Matthew Charles 123|||456|||7|: |:071000281|: BUL 3350- Chapter 26 6 Note $10,000 Albany, N.Y. April 7, 1998 Six months from date I promise to pay to the order of Pat Payee ten thousand dollars. (signed) Matthew Maker BUL 3350- Chapter 26 7 Certificate of Deposit NEGOTIABLE CERTIFICATE OF DEPOSIT The Mountain Bank Mountain, N.Y. No. 13900 June 1, 1998 THIS CERTIFIES THAT THERE HAS BEEN DEPOSITED with the undersigned the sum of $200,000.00 Two hundred thousand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Dollars Payable to the order of Pablo Payee on December 1, 2000, with interest only to maturity at the rate of Seven percent (7%) per annum upon surrender of this certificate properly indorsed. The Mountain Bank By (Signature) Malcolm Maker, Vice President Authorized Signature BUL 3350- Chapter 26 8 Formal Requirements of Formal Negotiable Instruments Negotiable Writing – any reduction to tangible form is sufficient. sufficient. Signed – any symbol executed or adopted by Signed a party with the intention to validate a writing. party Promise or Order to Pay • Promise to Pay – an undertaking to pay, which Promise must be more than a mere acknowledgment or recognition of an existing debt. recognition • Order to Pay – instruction to pay. Order instruction Unconditional – an absolute promise to pay Unconditional that is not subject to any contingencies. that BUL 3350- Chapter 26 9 Formal Requirements of Formal Negotiable Instruments Negotiable Reference to Other Agreements – does not Reference destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement. another The Particular Fund Doctrine – an order or The promise to pay only out of a particular fund no longer is conditional and does not destroy negotiability. negotiability. Money – Legal tender authorized or adopted by Money a sovereign government as part of its currency. sovereign BUL 3350- Chapter 26 10 Formal Requirements of Formal Negotiable Instruments Negotiable Fixed Amount – the holder must be assured of Fixed a determinable minimum principal payment although provisions in the instrument may increase the amount of recovery under certain circumstances. circumstances. No Other Promise or Order – a promise or No order to do an act in addition to the payment of money destroys negotiability. money Payable on Demand or at a Definite Time – an Payable instrument is demand paper if it must be paid upon request; an instrument is time paper if it is payable at a definite time. payable BUL 3350- Chapter 26 11 Formal Requirements of Formal Negotiable Instruments Negotiable Payable to Order or to Bearer – a negotiable Payable instrument must contain words indicating that the maker or drawer intends that it pass into the hands of someone other than the payee. hands • Payable to Order – payable to the “order of” (or Payable other words which mean the same) a named person or anyone designated by that person. or • Payable to Bearer – payable to the holder of the Payable instrument; includes instruments payable (1)­ instrument; payable to bearer or the order of bearer, (2)­that do payable not specify a payee, or (3)­payable to “cash” or to order of “cash.” order BUL 3350- Chapter 26 12 Order to Pay: Draft or Check issues draft or check to Drawer orders Drawee to pay Payee presents instrument for payment BUL 3350- Chapter 26 13 Promise to Pay: Promissory Note or Promise Certificate of Deposit Certificate Issues note or C.D. to Maker promises to pay Payee presents instrument for payment BUL 3350- Chapter 26 14 ...
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