Term
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Definition
| A special type of assignment that permits parties to transfer particular financial instruments to third parties, with or without consideration. |
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Term
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Definition
| Specific financial documents showing a debt from one party to another or a right to payment. |
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Term
Drafts
(Types of negotiable instruments) |
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Definition
| involve three parties; the drawer orders the drawee to pay a fixed amount of money to the payee. |
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Term
Checks
(Types of negotiable instruments) |
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Definition
| the most common form of draft; it must be drawn on a bank and payable on demand. The drawer orders the drawee (bank) to pay the payee on demand (on request of the holder). |
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Term
Promissory notes
(Types of negotiable instruments) |
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Definition
| Written promises by the issuer to pay a payee a certain sum of money, either on demand or at a stated date. |
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Term
Certificates of deposit
(Types of negotiable instruments) |
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Definition
| A specialized form of note that is given by a bank or thrift association. |
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Term
Drawer
(Parties to negotiable instruments) |
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Definition
| A person who orders a bank to withdraw money from an account to pay a designated person. |
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Term
Drawee
(Parties to negotiable instruments) |
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Definition
| A person or institution who holds the funds the drawer wants to transfer. They are often called bank. |
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Term
Payee
(Parties to negotiable instruments) |
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Definition
| A person who the drawee wants to pay the funds to. |
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Term
Maker
(Parties to negotiable instruments) |
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Definition
| A person who issues the promise to pay. |
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Term
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Definition
| Example: if you write a check to a grocery store to pay for a meal, you are the drawer because you are drawing on your funds in the bank to pay for the meal. You are also the maker because you issued the check. Your bank is the drawee because they are the party who holds the funds which are drawn on. The payee is the grocery store because you are paying them with the funds. |
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Term
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Definition
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Term
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Definition
| an undertaking to pay that is more than just recognition of an existing debt. |
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Term
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Definition
| means that the instrument is only payable to the named person or anyone designated by that person. |
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Term
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Definition
| means that the instrument is payable to the holder of the instrument. Often payable to bearer instruments do not specify a payee. |
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Term
Writing
( 9 Requirements for a Negotiable Instrument) |
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Definition
| The instrument must be in tangible written form, including electronic communications. |
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Term
Signed
(9 requirements for a negotiable instrument) |
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Definition
| any symbol executed or adopted by intention to validate a writing. |
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Term
Promise or order to pay
(9 requirements for a negotiable instrument) |
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Definition
must be present.
(9 requirements for a negotiable instrument) |
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Term
Unconditional
(9 requirements for a negotiable instrument) |
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Definition
| an absolute promise to pay with no contingencies. |
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Term
Fixed amount
(9 requirements for a negotiable instrument) |
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Definition
| the instrument must contain a determinable minimum principal payment although provisions in the instrument may increase the amount of payment under certain circumstances. |
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Term
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Definition
the due is payable in money
(9 requirements for a negotiable instrument) |
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Term
Contain no other undertaking
(9 requirements for a negotiable instrument) |
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Definition
| a promise or order to do an act in addition to the payment of money destroys negotiability |
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Term
Payable on demand or at a definite time
(9 requirements for a negotiable instrument) |
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Definition
| an instrument is demand paper if it must be paid upon request; an instrument is time paper if is payable at a definite time. |
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Term
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Definition
| (9 requirements for a negotiable instrument) |
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Term
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Definition
| (9 requirements for a negotiable instrument) |
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Term
| Reference to other agreements |
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Definition
| This doesn’t destroy negotiability unless it makes the instrument subject to or governed by the terms of another agreement. |
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Term
| The Particular Fund Doctrine |
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Definition
| An order or promise to pay only out of particular fund does not destroy negotiability. |
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Term
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Definition
| Is when the transfer is made in normal commercial transactions, the holder becomes a “holder in due course”. May collect from the maker or drawee without regard to most defenses other than fraud or theft. |
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Term
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Definition
| Example: if you finance a car and the car is a lemon (a car that malfunctions and was not in condition to buy and sell in the first place), you will still owe a subsequent holder for the note even if you have a legitimate claim against the seller of the car. |
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