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Commercial Paper & Secured Transactions

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two types of instruments & source of law

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Terms in this set (27)

two types of instruments & source of law

*drafts (check)
*notes
*UCC article 3

requirements for negotiability

1) a writing
2) payable to order or bearer
3) signed
4) reciting a sum certain (interest okay)
5)containing an UNCONDITIONAL PROMISE OR ORDER
6) payable on demand or at a definite time (acceleration clause ok)
7) no other promise, order, obligation or power given to the maker/drawer
8) Payable in CURRENCY

due negotiation

*proper transfer
*needs to happen to be eligible to be a holder in due course
*if payable to order of specific t'feree negotiated by delivery
*any subsequent negotiation requires payee endorse
*payable to bearer doesn't require indorsement

requisites for holder in due course (HDC) status

1) holder
2) paid value (can be past, can't be mere promise)
3) in good faith (subjective)
4)without notice that the instrument is overdue, has been dishonored, or any defense against or claim to it on the part of any person

Shelter rule & HDC

*t'feree has rights t'feror had
*so if acquire from HDC step into shoes
*allows donee to be an HDC