Commercial Paper, Part 2
Question 1: Define negotiable instrument and describe the three principle attributes of a negotiable instrument.
Answer 1: A negotiable instrument is a type of commercial paper that is defined as a document of title or evidence of indebtedness, which is unconditionally transferable in trading as a substitute for money. The three main attributes of a negotiable instrument are:A transferor passes that asset or property which is the subject of the instrument to a transferee by delivery and/or by endorsement.In accepting the instrument in good faith, the transferee immediately obtains non-forfeitable title, including his ability to file suit on that instrument in his name.The party liable in the instrument does not need to be given any notice of the transfer.
There are lots of good resources about Commercial Paper that you can find available.
Question 2: Distinguish between the following types of negotiable instruments:A noteA draftA check
Answer 2: A note -- a two-party negotiable instrument, most often referred to as a promissory note, in which the maker proffers an unconditional promise in writing to pay the payee or the payee’s designee a specific amount of money on demand or at a specified dateA draft -- a three-party negotiable instrument, in which the drawer orders the drawee to pay the payee a fixed amount of money on demand or at a specified dateA check -- a type of draft that is narrowly defined to reflect that the drawee is always a bank and the instrument is payable on demand
Question 3: Describe the purview of the Uniform Commercial Code.
Answer 3: Published in 1952, the Uniform Commercial Code attempts to reconcile the laws of sales and other commercial transactions in all 50 states within the United States. This objective is important because most commercial transactions extend beyond one state. The Code is the joint product of the American Law Institute and the National Conference of Commissioners on Uniform State Law. It is not itself the law, but is composed of recommendations of the laws that the authors of the code felt should be adopted in each state. Once enacted by a state’s legislature and codified into the state’s code of statutes, it becomes actual statutory law.
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