Chapter 30 Kinds of Instruments, Parties, and Negotiability

1. Chapter 30Kinds of Instruments, Parties, and Negotiability Twomey, Business Law and the Regulatory Environment (14th Ed.)

2. Types of Instruments and Parties [30-1] Maker (Borrower) Notes Payee Certificates of Deposit Maker (Bank) Payee Drawer (Seller) Drawee (Buyer) Draft Payee (Seller or Seller’s Bank) Drawer (Account Holder) Check Drawee (Bank) Payee Chapter 30

3. Promissory Note [30-2] PAYEE $ 5,000.00 Chicago, Illinois March 1 ,19-- Six months after date I promise to pay to the order of Carlos SandovalFive-Thousand and no/100 dollars Payable at Chicago National Bankwith interest at 8.5%No.43 Due Sept. 1, 19--Mary Huntington Smyth Pay to the order of Michael Ho Carlos Sandoval Payment guaranteed Michael Ho MAKER INDORSEE INDORSER (1st) INDORSER (2nd)/ GUARANTOR 19-- pay to ollars Smyth Chapter 30

4. Draft[30-3] June 30, 2000 Pay to the order of ABC Corp., Inc. Rt. 1 Waverly, Iowa Accepted by: Delia David DEF Corporation, Inc. John Jones ABC Corp., Inc. Chapter 30

5. Bearer vs. Order Paper[30-4] Bearer? Order? “Pay to _______________________” “Pay to Thomasina Jones” (check) “Pay to Thomasina Jones” (note) “Pay to John Jones or bearer” “Pay to John Jones and bearer” (check) “Pay to John Jones and bearer” (note) “Pay to the order of Thomasina Jones” “Pay to the order of cash” “Pay to the order of __________________” “Pay to the bearer” “Pay to cash” “Pay to the order of Thomasina Jones or bearer” Chapter 30

6. Promissory Note March 31, 1998 Six months after date debtor undersigned hereby promises to pay to the order of Galactic Games, Inc, three thousand six hundred dollars with interest at the rate of 10.9%. This note is secured by the video arcade games purchased with its funds. In the event of default, all sums due hereunder may be collected. Debtor agrees to pay all costs of collection including, but not limited to, attorney fees, costs of repossession, and costs of litigation. John R. Haldehand Video Arcade Inc. Chapter 30

7. Chapter 30 Summary An instrument or piece of commercial paper is a transferable, written, signed promise or order to pay a specified sum of money. An instrument is negotiable when it contains the terms required by the UCC. Chapter 30

8. Chapter 30 Summary [2] There are two categories of negotiable instruments: (1) promissory notes and (2) drafts. A certificate of deposit is classified as a promissory note. In addition to ordinary checks, there are also cashier’s checks and teller’s checks. A bank money order is a check even though it bears the words money order. Chapter 30

9. Chapter 30 Summary [3] The original parties to a note are the maker and the payee. The original parties to a draft are the drawer, the drawee, and the payee. The term party may refer to a natural person or to an artificial person, such as a corporation. It may also mean an unincorporated enterprise, a government, or a bank account. Chapter 30

10. Chapter 30 Summary [4] The requirements of negotiability are that the instrument (1) be in writing, (2) be signed by the maker or the drawer, and (3) contain a promise or order (4) of an unconditional character (5) to pay in money (6) a sum certain (7) on demand or at a definite time (8) to order or bearer. A check may be negotiable without being payable to order or bearer. If an instrument is not negotiable, it is governed by contract law. Chapter 30

11. Chapter 30 Summary [5] The maker of a promissory note and the acceptor of a draft are primarily liable for paying the face value of the instrument. Payment may be demanded from the maker or the acceptor as soon as the paper is due. Chapter 30