Bài giảng Business Law (13th edition) - Chapter 31: Negotiable Instruments

Commercial PaperNegotiable InstrumentsNegotiation & Holder in Due CourseLiability of PartiesChecks and Electronic Transfers7McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Negotiable InstrumentsPAETRHC31“We at Chrysler borrow money the old-fashioned way. We pay it back.”Lee Iacocca, Chairman and CEO of Chrysler Corporation, quoted in the New York Times (1983)Photo: Chrysler Center, NYCLearning ObjectivesNature of negotiable instrumentsTypes of negotiable instrumentsBenefits of negotiable instrumentsFormal requirements for negotiability31 - *Commercial paper refers to checks, promissory notes, and certificates of depositA contract for the payment of moneyUCC Article 3 (Negotiable Instruments) and Article 4 (Bank Deposits and Collections)Commercial paper may be negotiable:Transferred from party to party and accepted as a money substitute or as credit Two types: promises to pay, orders to payOverview31 - *Promissory notes and certificates of deposit issued by banks are promises to pay moneyPromissory note: two-party instrument by which a maker promises in writing to pay payee or a note bearer a fixed amount of money on demand or at specified time [3–104]Certificate of deposit: (1) acknowledgment by a bank that it received a money deposit and (2) promise by bank to repay the money [3–104(j)]Promises to Pay Money31 - *A draft is an order (not a promise) by a drawer to another (drawee) to pay money to a payee or instrument bearer[3–104(e)] Cashier’s check: draft on which drawer and drawee are same banking institution Teller’s check: draft drawn by bank (drawer) on second bank or payable through a bank [3–104(g) and (h)]Orders to Pay Money31 - *To be negotiable, instrument must be in writing, signed by the maker, containing an order or unconditional promise to pay a fixed amount of money, payable to order or to bearer, payable on demand at a definite time, and lack other instruction by maker [3–103; 3–104]Negotiability31 - *Any writing or signature type will sufficeConditional phrases destroy negotiabilityRequirement for “fixed amount of money” applies only to principalThe words identify whether instrument is payable (a) on demand or at a definite time and (b) to order or to bearerSee Pelican National Bank v. Provident Bank of MarylandDetails of Negotiability31 - *A instrument will remain negotiable if it includes statements about collateral to secure payment, confession of judgment, or waivers by person obligated on instrumentIf terms conflict or an ambiguous term exists, general rules of interpretation apply:Handwritten over typewritten or printedWords control numbersSpecial or Ambiguous Terms31 - *Test Your KnowledgeTrue=A, False = BCommercial paper includes checks, promissory notes, and certificates of deposit.UCC Articles 3 & 4 cover commercial paper.A certificate of deposit is a negotiable instrument in which a bank acknowledges it received a money deposit and promises to repay the sum in the future.31 - *Test Your KnowledgeMultiple ChoiceThe basic types of commercial paper are: (a) Promises to pay money(b) Orders to pay money (c) A document of title(d) Both A and B (e) All of the above31 - *Test Your KnowledgeMultiple ChoiceWhich of the following would be non-negotiable? (a) Please pay to the order of Sarah $100.” (b) “This promissory note is secured by my property in Pender County.” (c) “This promissory note is subject to Sarah’s graduation from college.” (d) None of the above; they are all negotiable31 - *Thought QuestionsDo you use negotiable instruments each week? How do you do your banking? 31 - *