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CPCU 530 - Chapter 6
Definitions
40
Other
Not Applicable
12/05/2007

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Term
Implied warranty of fitness for a particular purpose
Definition
an implied warranty that applies when the buyer relies on the seller’s expertise in selecting a particular product for a particular purpose
Term
Implied warranty of title
Definition
an implied promise in a contract for the sale of goods that the seller has legal ownership of goods and has no knowledge of any security interest or other lien on the goods other than those disclosed to the buyer
Term
FOB (free on board) place of shipment
Definition
a shipping condition under which the seller delivers goods to the carrier at the seller’s risk and expense and the ownership then shifts to the buyer
Term
FOB (free on board) place of destination
Definition
a shipping condition under which ownership passes form the passes from the seller to the buyer when the carrier delivers the goods to the buyer’s premises
Term
FAS (free alongside) vessel
Definition
a shipping condition under which goods are loaded on board the vessel at the seller’s risk and expense and then ownership passes to the buyer
Term
CIF (cost-insurance-freight)
Definition
a shipping condition under which the seller is obligated to pay for the insurance and freight charges for delivery to the buyer
Term
CAF (cost and freight)
Definition
a shipping condition under which the seller is obligated to pay for the freight charges but not for the insurance for delivery to the buyer
Term
COD (cash on delivery)
Definition
a shipping condition under which the buyer pays when the goods are delivered and has no right to inspect the goods as a condition to acceptance and payment
Term
Draft or Check
Definition
a type of commercial paper containing an unconditional order by the drawer (person making out the draft), requiring the drawee, usually a bank, to pay a certain sum to the payee or to the bearer
Term
Certificate of deposit (CD)
Definition
a type of commercial paper issued by a financial institution acknowledging receipt of money and promising to repay it, with interest, at a specific time
Term
Promissory note
Definition
a type of commercial paper containing a written promise to pay money on demand or at a definite time
Term
Primary liability
Definition
the absolute obligation to pay a negotiable instrument according to its terms
Term
Secondary liability
Definition
the obligation to pay a negotiable instrument only if someone else refuses to pay or to accept the instrument
Term
Special endorsement
Definition
a signature or the equivalent of a signature that specifies the person to whom a negotiable instrument is payable
Term
Blank, or general endorsement
Definition
a signature or the equivalent of a signature on a negotiable instrument that names no specific payee, making the instrument payable to the bearer
Term
Restrictive, or collection endorsement
Definition
a signature or the equivalent of a signature that includes language placing additional limits on further negotiation of a negotiable instrument
Term
Qualified endorsement
Definition
a signature or the equivalent of a signature that passes title to a negotiable instrument but limits the endorser’s liability to later holders if in instrument is later dishonored
Term
Unqualified endorsement
Definition
a signature or the equivalent of a signature that places no limits on the endorser’s liability on the paper
Term
Holder in due course
Definition
the person to whom a negotiable instrument has been issued or endorsed and who possesses it for value, in good faith and without notice that it may not be valid, can be claimed by another, is overdue, or was previously dishonored
Term
Personal defense
Definition
a claim to an instrument by any person and any defense that would be effective in a simple contract transaction
Term
Real defense
Definition
a defense of an obligor of a negotiable instrument that may be asserted even against a holder in due course.
Term
Certified check
Definition
a check guaranteed by a bank to be covered by sufficient funds on deposit
Term
Cashier’s check
Definition
a check drawn by a bank on its own funds
Term
Security interest
Definition
an interest in property that exists by contract as security for payment or performance of an obligation
Term
Secured transaction
Definition
a business arrangement in which a buyer or borrower gives collateral to the seller or lender to guarantee payment of an obligation
Term
Secured party
Definition
the seller or lender in a secured transaction who has a security interest in property or goods sold
Term
Collateral
Definition
the goods covered by a security interest in a secured transaction
Term
Pledge
Definition
a security device by which a borrower guarantees payment by delivering collateral to the lender to hold as security for the debt
Term
Surety
Definition
the party in a secured transaction who agrees to be responsible for the performance of another party’s contract to repay money borrowed or to perform a certain duty
Term
Principal (in a surety)
Definition
the party in a surety relationship whose performance is required and is guaranteed by the surety
Term
Obilgee
Definition
the party in a surety to whom the surety and principal are liable
Term
Limited warranty
Definition
a warranty that limits the consumer’s rights in some respects
Term
Full warranty
Definition
a warranty that promises to remedy a product defect within a reasonable time and without charge and to refund the purchase price or to replace the product if the repairs fail (“lemon provision”)
Term
Electronic funds transfer (EFT) system
Definition
a system that moves funds from one institution to another by means of electronic signals rather than the physical exchange of money or checks
Term
Bankruptcy law
Definition
the body of federal law that allows debtors who are unable to pay their creditors to divide their assets among their creditors to discharge the debts
Term
Chapter 7
Definition
the last resort chapter of the federal Bankruptcy Act under which the bankrupt organization’s nonexempt assets are distributed to its various creditors, and the balance of the debtor’s obligations are forgiven or discharged
Term
Chapter 11
Definition
the general reorganization chapter of the federal Bankruptcy Act under which a bankrupt partnership or corporation can continue doing business but must set up a plan for paying a portion, or possibly all, of the creditors of the ongoing business
Term
Chapter 12
Definition
a chapter of the federal Bankruptcy Act giving farm operations, other than large corporate farms, the same reorganization opportunities available to corporations and partnerships under Chapter 11
Term
Chapter 13
Definition
a chapter in the federal Bankruptcy Act giving small business operators or wage earners the same reorganization opportunities available to corporations and partnerships under chapter 11
Term
Liquidation
Definition
a bankruptcy proceeding in which a bankrupt organization does not have enough assets to pay all creditors, and the creditors are prioritized and paid according to the types of their claims
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