business law and the legal enviornment

7/24/2019 Business Law and the Legal Enviornment

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$wo"ey#%ennings,Andersons Business Law and the Legal Environment, 21stEd.

2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, ecept !or use as per"itted in a license distributed with a

certain product or service or otherwise on a password#protected website !or classroo" use.

David P. Twomey - Boston CollegeDavid P. Twomey - Boston College

Marianne M. Jennings - Arizona State UniversityMarianne M. Jennings - Arizona State University


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Chapter 28Chapter 28Kinds of Instruments, Parties,Kinds of Instruments, Parties,

and Negotiabilityand Negotiability


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A. Types Of Negotiable Instruments AndA. Types Of Negotiable Instruments And

PartiesParties

1.1. DefnitionDefnition. !inds "# $nstr%ments. !inds "# $nstr%ments&. Parties To $nstr%ments&. Parties To $nstr%ments


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A. Types of Negotiable InstrumentsA. Types of Negotiable Instrumentsand Partiesand Parties

.. !efinition.!efinition. (nconditional pro"ise or order to(nconditional pro"ise or order topay a !ied a"ount o! "oney.pay a !ied a"ount o! "oney. [LO.1][LO.1]

2.2. Kinds of Instruments.Kinds of Instruments.

'A('A(Promissory )otes.Promissory )otes.

'B('B(Certif*ates o# De+osit.Certif*ates o# De+osit.

'C('C(Dra#ts.Dra#ts.

'D('D(C,e*s.C,e*s.


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".". Parties to Instruments.Parties to Instruments. Party may e a aParty may e a anat%ral +erson or to an entity/ s%*, as anat%ral +erson or to an entity/ s%*, as a

*or+oration/ an %nin*or+orated enter+rise/ a*or+oration/ an %nin*or+orated enter+rise/ a

government/ or a an a**o%nt.government/ or a an a**o%nt. [LO.2][LO.2]'A('A( MaerMaer0 original +arty on a note0 original +arty on a note+romises to +ay amo%nt s+e*ifed.+romises to +ay amo%nt s+e*ifed.

'B('B( DrawerDrawer0 +arty w,o *reates a dra#t.0 +arty w,o *reates a dra#t.'C('C( DraweeDrawee0 +arty to w,om a dra#t is0 +arty to w,om a dra#t is

addressed 'i.e. an or *redit %nion(.addressed 'i.e. an or *redit %nion(.'D('D( PayeeP

ayee0 +arty named on t,e #a*e o# t,e0 +arty named on t,e #a*e o# t,einstr%ment to re*eive +ayment.instr%ment to re*eive +ayment.


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".". Parties to Instruments.Parties to Instruments. 'Contin%ed(.'Contin%ed(.'2('2( A**e+torA**e

+tor0 drawee a**e+ts liaility0 drawee a**e+ts liaility

to +ay.to +ay.

'3('3( Se*ondary "ligorSe*ondary "ligor

'A**ommodation Party(0 one w,ose'A**ommodation Party(0 one w,ose

name is added to an instr%ment toname is added to an instr%ment to

strengt,en its *olle*taility.strengt,en its *olle*taility.


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NotesMaker (Borrower)

Payee

Certificates

ofDeposit Payee

Maker (Bank)

Draft

Payee (Seller or Sellers Bank)

Drawee (Buyer)

Drawer (Seller)

Check

Payee

Drawee (Bank)

Drawer (Account Holder)

Types of InstrumentsTypes of Instrumentsand Partiesand Parties


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#. Negotiability#. Negotiability4. Defnition "# )egotiaility4. Defnition "# )egotiaility5. 6e7%irements "# )egotiaility5. 6e7%irements "# )egotiaility

8. 3a*tors )ot A9e*ting )egotiaility8. 3a*tors )ot A9e*ting )egotiaility:. Amig%o%s ;ang%age:. Amig%o%s ;ang%age


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$.$. !efinition of Negotiability.!efinition of Negotiability.

%.%. &e'uirements of Negotiability.&e'uirements of Negotiability. [LO.3][LO.3]'A('A(A re*ord 'writing(.A re*ord 'writing(.

'B('B(A%t,enti*ated 'signed( y t,e maerA%t,enti*ated 'signed( y t,e maeror t,e drawer.or t,e drawer. Agent,Agent, Absence o! Representative Capacity orAbsence o! Representative Capacity or

denti!ication o! /rincipal.denti!ication o! /rincipal.

#. Negotiability#. Negotiability


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%.%. &e'uirements for Negotiability&e'uirements for Negotiability continuedcontinued'C( Promise or "rder to Pay.'C( Promise or "rder to Pay.

'D('D(Un*onditional Promise or "rder.Un*onditional Promise or "rder.

Major ProductsMajor Productscase /ost#t note is separatecase /ost#t note is separate!ro" instru"ent.!ro" instru"ent.

'2('2( Payment in money.Payment in money.

'3('3( S%m *ertain.S%m *ertain.



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%.%. &e'uirements for Negotiability.&e'uirements for Negotiability. continued.continued.'=( Time o# Payment.'=( Time o# Payment.

113e"and.3e"and.

223e!inite $i"e.3e!inite $i"e.Smith v. aughn!Smith v. aughn!45hen you can6 is not45hen you can6 is notpayable on de"and.payable on de"and.

11Missing 3ate.Missing 3ate.

227!!ect o! 3ate on 3e"and nstru"ent.7!!ect o! 3ate on 3e"and nstru"ent.



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%.%. &e'uirements for Negotiability&e'uirements for Negotiability ()ontinued*.()ontinued*.

'>('>(?ords o# )egotiaility0 @Payale to?ords o# )egotiaility0 @Payale to

"rder or Bearer."rder or Bearer. $# only @to Jo,n Jones$# only @to Jo,n Jones

it is not negotialeit is not negotiale.. Sirius v. Eric"sonSirius v. Eric"soncase note wascase note was

nonnegotiable and governed by contract lawnonnegotiable and governed by contract law

because it was "ade payable to only onebecause it was "ade payable to only one

person and did not contain 4order6 language.person and did not contain 4order6 language.1 8rder /aper.1 8rder /aper.

2 9earer /aper.2 9earer /aper.



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Pay to the !earer"

Pay to the order of #ohn #ones or !earer"

Pay to #ohn #ones or !earer"

Pay to cash"

Pay to the order of cash"

Pay to the order of $ho%asina #ones"

Pay to #ohn #ones& !earer"

Pay to $ho%asina #ones" (check)

Pay to $ho%asina #ones" (note)

NegotiableNegotiable

NegotiableNegotiable

NOTNOT

NEGOTIABLENEGOTIABLE

Negotiable +s. Nonnegotiable PaperNegotiable +s. Nonnegotiable Paper


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.. -a)tors not Affe)ting Negotiability.-a)tors not Affe)ting Negotiability. "mitting"mittingdate o# ee*%tion or +ost-dating ,as nodate o# ee*%tion or +ost-dating ,as no

e9e*t. )or does +rovision relating toe9e*t. )or does +rovision relating to

*ollateral.*ollateral.

.. Ambiguous /anguage.Ambiguous /anguage. ?ords o%tran fg%res.?ords o%tran fg%res.

>andwriting s%+er*edes ty+ed or +rinted>andwriting s%+er*edes ty+ed or +rintedterms.terms.

Ty+ewritten s%+er*edes +re-+rintedTy+ewritten s%+er*edes +re-+rinted

terms.terms.



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8.8. 0tatute of /imitations0tatute of /imitations T,e UCC sets a t,ree-year stat%te o#T,e UCC sets a t,ree-year stat%te o#

limitations on most a*tions involvinglimitations on most a*tions involving

negotiale instr%ments.negotiale instr%ments. T,e stat%te is si years #or s%its onT,e stat%te is si years #or s%its on*ertif*ates o# de+osit and a**e+ted*ertif*ates o# de+osit and a**e+teddra#ts.dra#ts.


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