© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HAPTER 24: N EGOTIABLE I NSTRUMENTS : S ALES R EMEDIES

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. A. Negotiability. B. Types of Negotiable Instruments. C. Formal Requirements of Negotiable Instruments. T OPICS C OVERED C HAPTER 24: F ORM AND C ONTENT 2

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. N EGOTIABILITY  Legal concept that makes written instruments freely transferable and readily accepted as a form of payment in substitution of money.  Assignment vs. Negotiation. Assignment: assignee steps into shoes of assignor, acquires same rights, no more.  3

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. N EGOTIABILITY  Assignment vs. Negotiation. Negotiation: holder may acquire additional rights than original person, as a holder in due course, with few available defenses. 4

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T YPES OF N EGOTIABLE I NSTRUMENTS  Drafts – involves three parties: drawer orders drawee to pay fixed amount of money to payee.  5

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. D RAFT Two years from date pay to the order of Perry Payee $50,000 Fifty Thousand... Dollars St. Louis, Missouri May 1, 2009 (Signed) Donald Drawer DONALD DRAWER To:DEBRA DRAWEE 50 Main St. Louisville, Kentucky

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T YPES OF N EGOTIABLE I NSTRUMENTS  Checks. Specialized form of draft drawn on a bank and payable on demand; the drawer orders the drawee (bank) to pay the payee on demand (upon request of the holder). Substitute Check –legal equivalent of a check, delivered in electronic form.  7

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. C HECK HARRIS BANK  Rams Trust and Savings Bank Chicago, Illinois Pay to the order of No Feb Lilli-Marie Justin $ Five Hundred and no /100 DOLLARS Matthew Charles |: |:123|||456|||7|: Matthew Charles 123 Anystreet Rd. Anytown, NC 21234

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. T YPES OF N EGOTIABLE I NSTRUMENTS  Notes – a written promise by a maker (issuer) to pay a payee a certain sum of money, either on demand or at a stated date.  Certificates of Deposit – a specialized form of note that is given by a bank or thrift association. 9

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. O RDER TO P AY : D RAFT OR C HECK Drawer issues draft or check to Drawee ordersto pay Payee presents instrument for payment

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. Maker Payee Issues note or C.D. to promises to pay presents instrument for payment P ROMISE TO P AY : P ROMISSORY N OTE OR C ERTIFICATE OF D EPOSIT

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  Negotiability is wholly a matter of form, and all the requirements for negotiability must be met within the four corners of the instrument. Y IN V. S OCIETY N ATIONAL B ANK OF I NDIANA (1996). Y IN V. S OCIETY N ATIONAL B ANK OF I NDIANA (1996).  12

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  To be Negotiable, the instrument must: Be in writing – any reduction to tangible form. Be Signed – any symbol executed or adopted by a party with intention to validate a writing.  13

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  To be Negotiable, the instrument must: Contain a Promise or Order to Pay – undertaking (or instruction) to pay, which must be more than a mere acknowledgment or recognition of an existing debt. Be Unconditional – an absolute promise to pay that is not subject to any contingencies.  14

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  To be Negotiable, the instrument must: Be for a Fixed Amount. Of Money. Payable on Demand or at a Definite Time. N ATIONS B ANK OF V IRGINIA, N.A. V. B ARNES (1994).  N ATIONS B ANK OF V IRGINIA, N.A. V. B ARNES (1994).  15

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  To be Negotiable, the instrument must: Payable to Order or to Bearer – a negotiable instrument must contain words indicating that the maker or drawer intends that it pass into the hands of someone other than the payee.  16

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  To be Negotiable, the instrument must: Payable to Order or to Bearer. C OOPERATIVE C ENTRALE R AIFFEISENBANK B.A. V. B AILEY (1989). C OOPERATIVE C ENTRALE R AIFFEISENBANK B.A. V. B AILEY (1989). 17

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. F ORMAL R EQUIREMENTS OF N EGOTIABILITY  Dating of the Instrument. Negotiability not affected by date.  Incomplete Instruments. Not negotiable until completed.  Ambiguous Instruments. UCC provides various mechanisms for interpretations. 18