Paper so firmly attached to instrument as to be part of it.
Alteration
Unauthorized change or completion of negotiable instruments to modify obligation of a party.
Bad Check
Check the drawee bank refuses to pay.
Bank Draft (Teller's Check)
Check drawn by one bank on another.
Bearer Paper
Negotiable instrument payable to bearer.
Bond
Sealed, written contract obligation with essentials of note.
Cancellation
Act that indicates intention to destroy validity of an instrument.
Certificate of Deposit
Acknowledgement by bank of receipt of money with engagement to repay it.
Check
Draft drawn on bank and payable on demand.
Collateral Note
Note secured by personal property.
Coupon Bond
Bond with detachable individual coupons representing interest payments.
Dishonor
Presentment made, but acceptance or payment not made.
Draft ( Bill of Exchange)
Written order by one person directing another to pay sum of money to third person.
Drawee
Person ordered to pay draft.
Drawer
Person who executes a draft.
Fiduciary
A person in a relationship of trust and confidence
Holder
Person in possession of instruments payable to bearer or that person.
Holder in Due Course (holder through)
Holder for value and in good faith with no knowledge of dishonor, defenses, or claims, or that paper overdue; acquires rights superior to original owner.
Hybrid Defense:
Several defenses may be either universal or limited depending on the circumstances of a case.
What circumstances fall under Hybrid Defense?
Duress* Obtaining consent by means of threat-Duress nullifies a contract the defense is universal.
Incapacity other than Minority* The effect if the incapacity makes the instrument void.
Illegality* Specifies that instruments Based on such transactions are unenforceable
Alteration* Unauthorized change or completion of negotiable instrument to modify obligation of a party.
Indorsement
Signature of holder on back of instruments with any directions or limitations.
Indorser
Payee or holder who signs back of instrument
Limited Defenses ( Personal Defenses)
Certain defenses are limited to being raise against ordinary holders and cannot be raised against holders in due course.
Limited Defenses include?
1. ordinary contract defenses
2. fraud that induced the execution of the
insturment
3. conditional delivery
4. impropercompletion
5. payment or part payment
6. nondelivery
7. theft
Maker
Person who executes a note
Money Order
Instrument issued by business indicating payee may recieve
Negotiable Instrument
Document of payment, such as a check.
Negotiation
The act of transferring ownership.
Order Paper
Negotiable instrument payable to order
Payee
party to whom instrument is payable.
Presentment
The demand for acceptance made upon the maker.
Primary Liability
Liability without conditions for negotiable instrument that is due.
Promissory Note
Unconditional written promise to pay sum of money to another.
Registered Bond
Bond payable to specific person, whose name is recorded by issuers.
Renunciation
Unilateral act of holder giving up rights in the instruments or against a party to it.
Setoff
A claim by the party being sues against the party sueing
Trade Acceptance
Draft drawn by sellerin purchaser of goods
Universal Defenses Include?
1) Minority
2) Forgery
3) Fraud as to the nature of the instrument or its essential terms
4) Discharge in bankruptcy proceedings.
Vocher Check
Check with voucher attached
Types of Checks?
1) Cashier's Check*Check drawn by bank on it's funds in bank
2)Certified Check* Check accepted by bank's writing "Certified" on it.
3) Stale Check* Check presented more than six months after its date
Requirements for Negotiability
1) The instrument must be in writing and signed by the party executing it
2) The instrument must contain either an order to pay or a promise to pay
3) The order or the promise must be unconditional
4) The instrument must provide for the payment of a fixed amount of money
5) The instrument must be payable either on demand or at a fixed or definite time.
6) The instument must be payable to order of a payee or to bearer.
7) The payee ( unless the instrument is payable to bearer) and the drawee must be designated with resonable certainty.
Types of Drafts
Inland Draft* Draft drawn and payable in the U.S.
Foreign Draft* Draft drawn and payable outside the U.S.
Sight Draft* Draft payable on presentation of the holder
Time Draft* Draft payable a certain number of days or months after date or presentation.
Types of Indorsements
Blank Indorsement* Indorsement consisting of signature of indorser.
Restrictive Indorsement* Indorsement that restricts use of instrument.
Qualified Indorsement* Indorsement that limits liability of indorser.
Special Indorsement* Indorsement that designates particular person to whom payment is to be made.