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  1. Bearer Paper
    A negotiable instrument that is payable to whomever possesses it.
  2. Contract Liability
    When a party is resposible to pay the holder/HDC the face value of the instrument.
  3. Draft
    A type of negotiable instrument that contains an order to pay money. A draft has 3 parties: a drawer, a drawee, and the payee.
  4. Drawer
    The person who creates the draft and signs the draft on its face
  5. Drawee
    The party that the drawer has instructed to pay the payee; typically the drawer's bank.
  6. Endorsement
    A signature, usually on the back of a negotiable instrument, by the payee or some other holder. The endorsement is necessary to further negotiate the instrument when the instrument is order paper.
  7. Face Value
    The amount for which the instrument is payable.
  8. Holder
    A person who has possession of a negotiable instrument, and the instrument has all necessary endorsements.
  9. Holder in Due Course (HDC)
    A holder with enhanced rights in the negotiable instrument. Those rights include the best claim of owernship, the HDC's claim for payment cannot be denied because of a personal defense.
  10. Maker
    A person who creates a note and has primary liability for its payment.
  11. Negotiable
    A characteristic of an instrument that means the instrument is freely transferable from one party to another.
  12. Negotiation
    The actual transfer of ownership of a negotiable instrument from one party to another. Negotiation can be accomplished by delivery alone if the instrument is bearer paper; if the instrument is order paper, then it must be transferred by delivery and the necessary endorsements.
  13. Note
    A 2-party (the maker and payee) negotiable instrument that contains a promise to pay money.
  14. Order Paper
    An instrument that is payable to a particular party
  15. Payee
    The party to whom the negotiable instrument was originally payable.
  16. Primary Liability
    The party from whom the holder/HDC of a negotiable instrument must first seek payment; the maker of a note or the acceptor of a draft.
  17. Secondary Liability
    Parties who are liable to the holder/HDC if the primary party dishonors the instrument; endorsers and drawers.
  18. Warranty Liability
    Resonsibility to a holder/HDC to return the money actually paid for the negotible instrument.
Card Set
Commercial Paper
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