Book Notes - BookNotes Chapter24: : sumofmoney...

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Book Notes Chapter 24: The Functions and Creation of Negotiable Instruments Negotiable Instrument : a signed writing that contains an unconditional promise or order to pay an exact  sum of money ARTICLE 3 AND 4 OF THE UCC Functions of Instruments Substitute for money (check) An extension of credit (promissory note) - Must be “easily transferable without danger of being uncollectible” TYPES OF NEGOTIABLE INSTRUMENTS Drafts Checks- all checks are demand instruments  Checking accounts are also known as demand deposits  Notes Certificate of deposit Holder : the person in possession if the instrument is payable to bearer, or in the cases of an instrument  payable to an identified person, if the identified person is in possession  Issue : the first delivery of an instrument by the maker or drawer, whether to a holder or non-holder, for the  purpose of giving right on the instrument to any person
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DRAFTS An unconditional written order that involves three parties Drawer- creates the draft Drawee- order by drawer to pay the money Payee- person being paid  Time drafts Payable at a definite future time Sight draft Demand draft Payable on sight- when it is presented to the drawee for payment—usually a bank Acceptance : the drawee’s written promise to pay the draft when it comes due- “ accepted 9/12/11 Trade Acceptances Used in the sale of goods The seller of the goods is both the drawer and the payee Bankers acceptance: the draft is drawn by a seller on the buyer’s bank for acceptance  PROMISSORY NOTES  (promised to pay) A written promise made by one person (the maker) to another (payee) Maker- person who created the note Payee- person getting paid 
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CERTIFICATE OF DEPOSITT  (promises to pay) A type of note that is issued when a party deposits money with a bank, and the bank promises to repay  the money, with interest, on a certain date Maker- bank Payee- depositor  REQUIREMENTS FOR NEGOTIABILITY 1. Be in writing 2. Be signed by the maker of the drawer 2. Be an unconditional promise or order to pay 4. State a fixed amount of money 5. Be payable on demand or at a definite time 6. Be payable to order or to bearer, unless it is a check 1. Written Form Permanence- must be written on something stable, not in sand Portability- must be movable  2. Signatures Must be signed by  The maker is it is a note or CD The drawer if it is a draft or check  Requirements “Any symbol executed or adopted by a party with present intention to authenticate a writing”
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An “X” must be signed by a witness
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