Busi. Law Chapter 18

promissory note

a written promise made by one person (the maker) to pay a fixed amount of money to another person (the payee or a subsequent holder) on demand or on a specified date.

universal defenses

defenses that are valid against all holders of a negotiable instrument, including holders in due course (HDC) and holders with the rights of HDCs.

personal defenses

defenses that can be used to avoid payment to an ordinary holder of a negotiable instrument but not a holder in due course or a holder with the rights of an HDC.

presentment warranties

implied warranties, made by any person who presents an instrument for payment or acceptance, that (1) the person obtaining payment or acceptance is entitled to enforce the instrument or is authorized to obtain payment or acceptance on behalf of a person who is entitled to enforce the instrument, (2) the instrument has not been altered, and (3) the person obtaining payment or accepting has no knowledge that the signature of the drawer of the instrument is unauthorized.

transfer warranties

implied warranties, made by any person who transfers an instrument for consideration to subsequent transferees and holders who take the instrument in good faith, that (1) the transferor is entitled to enforce the instrument; (2) all signatures are authentic and authorized; (3) the instrument has not been altered; (4) this instrument is not subject to a defense or claim of any party that can be asserted against the transferor; and (5) the transferor has no knowledge of any insolvency proceedings against the maker, the acceptor, or the drawer of the instrument.

acceptance

in contract law, a voluntary act by the offeree that shows assent, or agreement to the terms of an offer; may consist of words or conduct. In negotiable instruments law, the drawee's signed agreement to pay a draft when it is presented.

shelter principle

the principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC.

signature

under the UCC, "any symbol executed or adopted by a party with a present intention to authenticate a writing."

extension clause

a clause in a time instrument that allows the instrument's date of maturity to be extended int the future.

acceleration clause

a clause that allows a payee or other holder of a time instrument to demand payment of the entire amount due, with interest, if a certain event occurs, such as a default in the payment of an installment when due.

check

a draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of money to the holder on demand.

acceptor

a drawee that is legally obligated to pay an instrument when it is presented later for payment.

holder in due course

a holder who acquired a negotiable instrument for value; in good faith; and without notice that the instrument is overdue, that it has been dishonored, that any person has a defense against it or a claim to ti, or that the instrument contains unauthorized signatures, has been altered, or is so irregular or incomplete as to call into question it authenticity.

dishonor

a negotiable instrument is dishonored when payment or acceptance of the instrument, whichever is required, is refused even though the instrument is presented in a timely and proper manner.

order instrument

a negotiable instrument that is payable "to the order of an identified person" or "to an identified person or order."

certificate of deposit

a note issued by a bank in which the bank acknowledges the receipt of funds from a party and promises to repay that amount, with interest, to the party on a certain date.

fictitious payee

a payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument. Indorsements by fictitious payees are treated as authorized indorsements under Article 3 of the UCC.

bearer

a person in possession of an instrument payable to bearer or indorsed in blank.

payee

a person to whom an instrument is made payable.

negotiation

a process in which parties attempt to settle their disputes informally, with or without attorneys to represent them. In the context of negotiable instruments, the transfer of an instrument in such form that the transferee (the person to whom the instrument is transferred to) becomes a holder.

indorsement

a signature placed on an instrument for the purpose of transferring one's ownership rights in the instrument.

negotiable instrument

a signed writing (record that contains an unconditional promise or order to pay an exact sum on demand or at an exact future time to a specified person or order, or to bearer.

draft

any instrument drawn on a drawee that orders the drawee to pay a certain sum of money, usually to a third party (the payee), on demand or at a definite future time.

bearer instrument

any instrument that is not payable to a specific person, including instruments payable to the bearer or to "cash".

holder

any person in possession of an instrument drawn, issued, or indorsed to him or her, to his or her order, to bearer, or in blank

maker

one who promises to pay a fixed amount of money to the holder of a promissory note or a certificate of deposit.

imposter

one who, by use of the mails, internet, telephone, or personal appearance, induces a maker or drawer to issue an instrument in the name of an impersonated payee. Indorsements by imposters are treated as authorized indorsements under Article 3 of the UCC.

presentment

the act of presenting an instrument to the party liable on the instrument to collect payment. Presentment also occurs when a person presents an instrument to a drawee for a required acceptance.

drawer

the party that initiates a draft (such as a check), thereby ordering the drawee to pay.

drawee

the party that is ordered to pay a draft or a check. With a check, a bank or a financial institution is always the drawee.