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Terms in this set (98)

Historically you would have some one that bought goods on credit -----------------------Seller. Seller will extend credit in exchange for a right to receive money some point in the future from the buyer. Seller has the right to receive money. Asset only goes to the buyer. Seller can take that asset and assign it to a third party. Called Asset assignment. It is possible the goods are defective and are not all there. Do not meet expectations. Buyer goes bankrupt or unwilling and do not want to work with that third party. If seller is supposed to get $100 the third party will pay less that $100

Borrower----- lender Creditor can receive the right to get the money now they can have a negotiation of a NI
This also goes to third party- Third party may go to holder in due course (HDC) - good faith purchaser for value------ if we have a non- consumer credit transaction- when our third party goes to collect from the buyer of goods. They may have a defense of payment. If it is a personal defense our third party can collect on that instrument. Legally obligated to pay third party. Rather take negotiable instruments than under the law of assignment.

Assignment: Buyer borrowing money to buy equipment and signs installment contract. It will pay 2,000 per month for 24 months. If in month 3 equipment breaks down and buyer stops paying. Buyer has defense to payment. Buyer can hold money

Negotiable instrument: Buyer borrowing money to buy equipment and signs installment contract. It will pay 2,000 per month for 24 months. This was promisary not the equipment breaking down is a personal defense not a real defense. Buyer can not hold payment.

Assignment < Negotiable in terms of the third party
(a) Except as provided in subsections (c) and (d),

"negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:

(1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;

(2) is payable on demand or at a definite time; and

(3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.

(b) "Instrument" means a negotiable instrument.

(c) An order that meets all of the requirements of subsection (a), except paragraph (1), and otherwise falls within the definition of "check" in subsection (f) is a negotiable instrument and a check.

(d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Article.

(e) An instrument is a "note" if it is a promise and is a "draft" if it is an order. If an instrument falls within the definition of both "note" and "draft," a person entitled to enforce the instrument may treat it as either.

(f) "Check" means (i) a draft, other than a documentary draft, payable on demand and drawn on a bank or (ii) a cashier's check or teller's check. An instrument may be a check even though it is described on its face by another term, such as "money order."

(g) "Cashier's check" means a draft with respect to which the drawer and drawee are the same bank or branches of the same bank.

(h) "Teller's check" means a draft drawn by a bank (i) on another bank, or (ii) payable at or through a bank.

(i) "Traveler's check" means an instrument that (i) is payable on demand, (ii) is drawn on or payable at or through a bank, (iii) is designated by the term "traveler's check" or by a substantially similar term, and (iv) requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the instrument.

(j) "Certificate of deposit" means an instrument containing an acknowledgment by a bank that a sum of money has been received by the bank and a promise by the bank to repay the sum of money. A certificate of deposit is a note of the bank.