Business Law Test #7

negotiable instrument

paper that serves as a substitute for money or as a credit transaction

3 requirements for transferee to be free from personal defenses

1. Instrument must be negotiable

2. instrument must be properly negotiated to transferee

3. transferee must be hold in due course

notes

2 party instrument

payee or bearer

person to whom the promise is made

certificate of deposit

short term type of note in which the bank is the maker

Draft aka bill of exchange

simple order to pay money

check

a demand draft drawn on the bank

depository bank

1st bank to which the item is transfered for collection

payor bank

bank by which an item is payable

intermidarty bank

bank to which an item is transfered in course of collection

collecting bank

bank handling the item for collection

presenting bank

any bank presenting the item to the payor bank

clearing house

an assocaition of banks clearing items

honor

pay or accept the instrument

dishonor

primary party’s refusal to make payment or grant acceptance within the allocated time after payment is properly made by the holder

customer

person having an account with a bank

$100 tomorrow expectation

1st $100 of any deposit must be made avilable to the customer the following day

endorsement

signing name on back of instrument for the purpose of transferring title

collecting banks

when a bank has recieved a check for collection its operation includes presentment and settle

presentment

demand for payment by the holder

settle

to pay in cash from clearing house to payee

debtor

creditor relationship

when cust is depositor

cust is creditor

when cust is borrower

bank is creditor

set off

right of bank to seize money from cust

wrongful dishonor

bank mistankinly dishonors check and is responsible for damges

characteristics of crypto currency

1. no transaction fees

2. transactions take place quickly

3. transactions can occur anywhere in the world

4. participants transfers are anyonymous

4 prerequisits of negotiable instrument

1. signed by maker

2. unconditinal promise to pay sum certain

3. payable on demand

4. payable to order, bearer, or cash

signed by maker

kind of writing, signature, symbol can be used instead

unconditional promise

sum certain in money, must be unconditional, particular fund concept

payable upon demand

acceleration and extension clauses

blank endorsement

sig written on instruemnt

special endorsment

specifes to whom is males the instruemnt payble