Chapter 31 negotiable instruments quiz business law
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Typewritten language takes precedence over preprinted language. If a party adds handwritten or typewritten language that is inconsistent with the preprinted language on the instrument (note or draft), the handwriting takes precedence over both the typewritten and preprinted language. Certain information that is lacking, such as the date of issue of the instrument, the place of payment, and the sum in figures, likewise has no effect on the negotiability of the instrument neither does the practice of postdating or antedating a check. To be negotiable, an instrument must meet the following requirements: It must (1) be in writing, (2) be signed by the maker or drawer, (3) contain an unconditional promise or order to pay, (4) state a fixed amount of money, (5) be payable on demand (or at sight) or at a definite time, (6) be payable to order or to bearer, and (7) designate a drawee (in the case of a draft) with reasonable certainty.Ĭertain language that is added, such as the place where the instrument is payable and the words Value received, has no effect on negotiability. Instruments may be either negotiable or nonnegotiable depending on the language used in the instrument. A check is a type of draft in which the drawee is always a bank and the drawer is the depositor. The person issuing the draft or check is the drawer, the person ordered to pay is the drawee, and the person to whom the draft or check is payable is the payee. The maker is the person making the promise to pay, and the payee is the person to whom the note and certificate of deposit are made payable. Notes and certificates of deposit have two parties. Within these two classifications, the UCC specifies four types of instruments: drafts and checks, which are orders to pay, and promissory notes and certificates of deposit,which are promises to pay. There are two classifications of negotiable instruments: promises to pay and orders to pay. portionment of Business Risks through Legal Devices.
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Two types of parties are secondarily liable on negotiable. A holder in due course must first be a holder. D) accepts a properly negotiated instrument.
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C) takes an instrument for value, in good faith, and without notice. B) is found with a fraud in the inducement. Distinguish between the two basic types of negotiable instruments - promises to pay, and order to pay. accepts all liability for the paying of the instrument.Assess the importance of negotiable instruments.Explain what a negotiable instrument is.After reading this chapter, students should be able to: