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lecture notes ch. 24

lecture notes ch. 24 - Chapter24 Title:BusLawSeal.eps...

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Chapter 24 The Function and Creation C HAPTER O UTLINE I. Articles 3 and 4 of the UCC When an instrument is negotiable, UCC Article 3 governs its transfer. To qualify as negotiable, an instrument must meet the requirements imposed by UCC 3–103. A. T HE 1990 R EVISION OF A RTICLES 3 AND 4 In 1990, a revised version of Article 3 was issued for adoption by the states. Some of  the changes to Article 3 clarified old sections. Some altered the existing provisions. The  revised Article 3 is the basis for the discussion in this and the other chapters on  negotiable instruments. Article 4 was also revised in 1990, in part to reflect the  changes to Article 3. References to Article 4 are also to the revised provisions. B. T HE 2002 A MENDMENTS TO A RTICLES 3 AND 4 Both articles were updated with proposed amendments in 2002 to comport with the Uniform Electronic Transactions Act (UETA) and the needs of e-commerce. II. Types of Negotiable Instruments A. D RAFTS AND C HECKS (O RDERS TO P AY ) A draft (bill of exchange) is an unconditional written order. 127
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128           INSTRUCTOR’S MANUAL TO ACCOMPANY  BUSINESS LAW , ELEVENTH EDITION 1. Time Drafts and Sight Drafts A time draft is a draft payable at a definite future time. A sight (or demand) draft is payable on sight. 2. Trade Acceptances A trade acceptance is a draft often used in sales of goods. The seller is both the drawer and the payee, and the draft orders the buyer to pay a specified sum of money to the seller, usually at a stated time in the future. 3. Checks A check is a draft, drawn on a bank and payable on demand. B. P ROMISSORY N OTES AND CD S (P ROMISES TO P AY ) A promissory note (or simply note ) is a written promise between two parties. Notes are used in a number of credit transactions and often bear the name of the transaction involved. A certificate of deposit (CD) is a type of note issued by a bank. ✩★✩ A NSWER TO V IDEO Q UESTION L TR . A ✩★✩ Who is the maker of the promissory note discussed in the video? A promissory note is a promise made by one person (the maker of the promise) to another (the payee). In the video, the note is payable to Onyx Advertising. Thus, Onyx is the payee, and Vexnet (the party who will owe money upon the completion of advertising campaign) is the maker. BASIC TYPES OF NEGOTIABLE INSTRUMENTS INSTRUMENTS CHARACTERISTICS PARTIES Orders to Pay Draft An order by one person to another person or to bearer. Drawer—the person who signs or makes the order to pay. Check A draft drawn on a bank and payable on demand. a Checks include: a. Cashier’s check—a draft in which the drawer and drawee are the same bank or branches of the same bank. b. Traveler’s check—an instrument drawn or payable at or through a bank that requires, as a condition to payment, a countersignature by a person whose signature appears on the instrument.
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