...Assignment on Negotiable Instrument Course Title: Legal Environment of International Business Prepared by: Farha Fatema Date of Submission: 28/04/2011 Executive Summary Negotiable instruments are written orders or unconditional promises to pay a fixed sum of money on demand or at a certain time. Promissory notes, bills of exchange, checks, drafts, and certificates of deposit are all examples of negotiable instruments. Negotiable instruments may be transferred from one person to another, who is known as a holder in due course. Upon transfer, also called negotiation of the instrument, the holder in due course obtains full legal title to the instrument. Negotiable instruments may be transferred by delivery or by endorsement and delivery. One type of negotiable instrument, called a promissory note, involves only two parties, the maker of the note and the payee, or the party to whom the note is payable. With a promissory note, the maker promises to pay a certain amount to the payee. Another type of negotiable instrument, called a bill of exchange, involves three parties. The party who drafts the bill of exchange is known as the drawer. The party who is called on to make payment is known as the drawee, and the party to whom payment is to be made is known as the payee. A check is an example of a bill of exchange, where the individual or business writing the check is the drawer, the bank is the drawee, and the person or business...
Words: 2594 - Pages: 11
...things this is negotiable instrument called promissory note. Promissory note is a document passed from one person to another that is a written and signed unconditional promise to pay a specified sum of money on demand or at a definite time to order (to specific person or entity) or bearer. Promissory notes generally involve just two parties: the person signing the note who is promising to pay money (the “maker” of the note); and the person to whom the note specifies the money is to be paid (the “payee” of the note) (Promissory Note). Now just because you write on a piece of paper that you owe someone money and sign it doesn’t mean that you have created a negotiable instrument under the UCC. There are certain things that are require in order for it to be a negotiable instrument. These things include a signed document of promising payment of money and it must be unconditional, the amount of money must be a fixed amount (with or without interest charges), the instrument must be payable to bearer, the promise must be payable on demand or at a definite time, and the promise must not state any other instruction by the person promising or ordering payment to do any act in addition to the payment of money. Joelle note contain all of the above, which makes it a negotiable instrument called a promissory note. Joelle promissory note is negotiable but both parties need to agree with any new terms. Promissory notes are a formal written contract that may become negotiable if both parties...
Words: 354 - Pages: 2
...person can sue on a negotiable instrument unless he is named therein as the payee or unless he becomes entitled to it as indorsee or becomes the bearer of an instrument payable to bearer. In the Full Bench case reported in Subba Narayana Vathiyar v. Ramaswami Aiyar,1 it has been held that in a suit on a negotiable instrument by the payee or indorsee, it is not open to the defendant to plead that the plaintiff is a mere benamidar not entitled to payment with a view to show that the note has been discharged by payment to real owner. Again in the Full Bench decision of the Patna High Court in Bacha Prasad v. Janaki,2 it has been held that a person who is not a holder of a negotiable instrument cannot maintain a suit for recovery of money due under it even though holder is admittedly the benamidar and is impleaded in the suit. In the said decision, it has also been held that "a beneficiary cannot be called a holder of the instrument and payment to him cannot discharge the maker thereof unless the case falls under section 82(c) of the Act". So also, it has been held in the decision reported in Subharaya v. Abiram,3 that a beneficiary does not become a holder of the instrument even upon getting a declaration that he is the beneficial owner and the payee is only a benamidar. In this connection it has to be noted that Allahabad and Rajasthan High Courts have taken a slightly different view and held that in certain cases a beneficiary may maintain a suit on a negotiable instrument "if holder...
Words: 16119 - Pages: 65
...November 11, 2013 Grantham University BA 265 Business Law II Week 6 Assignment Negotiable Instruments On the back of an envelope, Phoebe writes, “I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe.” The type of instrument that is used in this scenario is a promissory note. When a promissory note is present, this is a written promise which involves two parties (Miller & Hollowell, 2011). The two parties that are present in a promissory note is the maker (payer) and the payee and the note may be made with a specific date mentioned or on demand-when the payee requests the money (Miller & Hollowell, 2011). In the scenario above, the maker is Phoebe and the payee is Quint and it the note is written to indicate that when Quint asks for the $600, Phoebe is to pay it at that time. In order for a note (or any other instrument) to be negotiable it must meet all six of the following requirements. These requirements are (Miller & Hollowell, 2011): 1. The instrument must be in writing-Phoebe wrote the promissory note on the back of an envelope. 2. It must be signed by the maker (payer) or the drawer-Phoebe signed the note 3. It must be an unconditional promise to pay-there were no conditions set by Phoebe that may hinder Quint from requesting payment (i.e.-I, Phoebe, will pay Quint the $600 if he calls me no later than noon on the day he requests payment) 4. The note must state a fixed amount of money-Phoebe’s promissory note listed...
Words: 572 - Pages: 3
...defendant’s motion for summary judgment filed on August 1, 2006, in response to the debtor-plaintiff’s complaint alleging the creditor-defendant violated the automatic stay [i.e. 11 U.S.C. § 362(a)] by cashing the plaintiff’s check after she filed a petition for relief under Chapter 13 of the U.S. Bankruptcy Code. The defendant avers it did not violate the automatic stay because of the exception provided in 11 U.S.C. § 362(b)(11). The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157 and 1334. The Court heard oral arguments on September 12, 2006 and directed the parties to file additional briefs dealing with whether the check at issue qualified as a negotiable instrument. For the reasons stated below, the 1 Case 06-40087-JJR Doc 31 Filed 10/26/06 Entered 10/26/06 08:56:27 Document Page 1 of 10 Desc Main Court finds the motion for summary judgment is due to be GRANTED. Background On April 15, 2006, the plaintiff received a “payday loan” for $500.00 from the defendant. In exchange for the $500.00 loan, the plaintiff gave the defendant a check for $587.50, which was intended to pay the principal of the loan plus interest and fees. The defendant agreed to hold the check until April 29, 2006. On May 9, 2006, the debtor-plaintiff filed for Chapter 13 bankruptcy relief. For purposes of this summary...
Words: 3439 - Pages: 14
...Ninth Edition CPA Preparatory Program Regulation Negotiable Instruments Sample Brian Hock, CMA, CIA with Dave Fairchild, CPA, CMA HOCK international, LLC P.O. Box 204 Oxford, Ohio 45056 (866) 807-HOCK or (866) 807-4625 (281) 652-5768 www.hockinternational.com cma@hockinternational.com Published August 2011 Acknowledgements Material from Uniform CPA Examination, Selected Questions and Unofficial Answers, Copyright © 1990-2011 by the American Institute of Certified Public Accountants, Inc., is reprinted and/or adapted with permission. Acknowledgement is due to the Institute of Certified Management Accountants for permission to use questions and problems from past CMA Exams. The questions and unofficial answers are copyrighted by the Certified Institute of Management Accountants and have been used here with their permission. © 2011 HOCK international, LLC No part of this work may be used, transmitted, reproduced or sold in any form or by any means without prior written permission from HOCK international, LLC. Thanks The author would like to thank the following people for their assistance in the production of this material: Kevin Hock for his work in the formatting and layout of the material, Lynn Roden, CMA for her assistance in the technical elements of the material, All of the staff of HOCK Training and HOCK international for their patience in the multiple revisions of the material, The students of HOCK Training in all of our classrooms and...
Words: 11083 - Pages: 45
...Negotiable Instruments (Writing Assignment 6) BA 265 Business Law December 11, 2013 Negotiable Instruments Negotiable Instrument is the name of a document that promises to pay a sum of money. The document states that the singer of the document agrees to pay the owner of the document a set amount of money which is also stated on the document. On the back of an envelope, Phoebe writes, “I promise to pay Quint or bearer $600 on demand. [Signed] Phoebe.” This instrument is a promissory note and a bearer note, and it is negotiable. A promissory note is a written promise made by one person (the maker) to pay a fixed sum of money to another person (the payee) on demand or at a specified future time. The maker of this note is Phoebe. The payee is Quint or bearer. A note that is payable to a specific payee or bearer is a bearer note. A bearer is anyone holding something such as a check, promissory note, bank draft, or bond. This is important when the document states it is payable to bearer which means whoever holds this paper can receive the funds due on it. A negotiable instrument that is payable to bearer or to cash or to the order of cash that is not naming a payee, is a bearer instrument and is called bearer paper. To be negotiable, an instrument must be written, be signed by the maker or drawer, be an unconditional promise or order to pay, state a fixed amount of money, be payable on demand or at a definite time, and be payable to order or to bearer unless it is a...
Words: 422 - Pages: 2
...sovereigns of Delhi in the early part of the fourtheenth century. The word 'hundi', a generic term used to denote instruments of exchange in vernacular is derived from the Sanskrit root 'hund' meaning 'to collect' and well expresses the purpose to which instruments were utilised in their origin. With the advent of British rule in India commercial activities increased to a great extent. The growing demands for money could not be met be mere supply of coins; and the instrument of credit took the function of money which they represented. Before the enactment of the Negotiable Instrument Act, 1881, the law of negotiable instruments as prevalent in England was applied by the Courts in India when any question relating to such instruments arose between Europeans. When then parties were Hindu or Mohammedans, their personal law was held to apply. Though neither the law books of Hindu nor those of Mohammedans contain any reference to negotiable instruments as such, the customs prevailing among the merchants of the respective community were recognised by the courts and applied to the transactions among them. During the course of time there had developed in the country a strong body of usage relating to “hundis”, which even the Legislature could not without hardship to Indian bankers and merchants ignore. In fact, the Legislature felt the strength of such local usages and though fit to exempt them from the operation of the Act with a proviso that such usage may be excluded altogether by appropriate...
Words: 8689 - Pages: 35
...a few months, Rogers and Blythe stopped paying their loan to Charter. Charter sued to recover from Holly Hill’s note and mortgage. Negotiable instruments are an important component of transactions between unrelated parties when doing business. Negotiable instruments are regulated by Article 3 of the UCC. Article 3 requires a document must meet certain criteria in order to be classified as a negotiable instrument. The instrument must be in writing, permanent and portable, signed by the maker, and it must be an unconditional promise to pay. It has to state a fixed sum of money and not require any additional undertaking besides the payment. It also has to be payable on demand or at a definite time and be payable to order or bearer. If these conditions are met, the holder of the negotiable instrument can transfer their interest in the instrument to a third party. The third party taking the negotiable instrument from the holder becomes the holder in due course. The promissory note in this case stated above contained language that referenced the other mortgage. Because the note referenced the other mortgage, it does not pass the test for not requiring any additional undertaking besides payment and is therefore not a negotiable instrument and not enforceable under Article 3 of the UCC. Because the document is determined to not be a negotiable instrument, the holder...
Words: 413 - Pages: 2
...Negotiable Instruments | | | | | Definition | | | | A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. Under section 13 of the Negotiable Instruments Act, “a negotiable instrument” means a promissory note, bills of exchange or chequ payable either to order or to bearer”. According to Judge Willis: “A negotiable instrument is one the property in which is acquired by every person who takes it bonafide and for value, not withstanding any defect of title in the person from whom he took it.” It is a document contemplated by a contract, which (1) warrants the payment of money, the promise of or order for conveyance of which is unconditional; (2) specifies or describes the payee, who is designated on and memorialized by the instrument; and (3) is capable of change through transfer by valid negotiation of the instrument. As payment of money is promised subsequently, the instrument itself can be used by the holder in due course as a store of value; although, instruments can be transferred for amounts in contractual exchange that are less than the instrument’s face value (known as “discounting”). Types of Negotiable instruments a) Promissory note: A written, dated and signed two-party instrument containing an unconditional promise by the maker to pay a definite sum of money to a payee on demand or at specified future date. b) Bill of exchange: Bills of exchange are financial...
Words: 8743 - Pages: 35
...law LAW 504 PANCITO, Hazeleen Rose B. 3:30-5:30 PM Title I. - Negotiable Instruments in General Article I. - Form and Interpretation. SEC. 1. An instrument to be negotiable must conform to the following requirements: 1. It must be in writing and signed by the maker or drawer. 2. Must contain an unconditional promise or order to pay a sum certain in money. 3.Must be payable on demand or at a fixed or determinable future time. 4. Must be payable to the order or to bearer; and, 5. Where the instrument is addressed to a drawee,he must be named or otherwise indicated therein with reasonable certainty. Writing And Signature Writing and signature of maker or drawer are essentialto negotiability. Our natural conception of a negotiable instrument is that of a written paper. "Writing" includes print.12 The substance of the impression may be ink or lead.13 The former is of course preferable from the standpoint of sound and safe business practice. Signature. An instrument to be negotiable must be signed. "No person is liable on the instrument whose signature does not appear thereon, except as herein otherwise expressly provided. But one who signs in a trade or assumed name will be liable to the same extent as if he had signed in his own name." Example 8. Anotesigned "Western Novelty Co., Unincorporated" binds all who go under that trade name, assuming that the note is given under the authority of those sought to be held. Printed or lithographed signature is a legal...
Words: 2010 - Pages: 9
...Question 1: Explain the term negotiable instruments and briefly state its types. Negotiable instrument is a document that constitutes an obligation to pay a sum of money at a future date or on demand. According to Justice Willis, “a negotiable instrument is one, the property in which is acquired by anyone who takes it bona fide and for value notwithstanding any defects of the title in the person from whom he took it”. Any document is capable of being called a “negotiable instrument” if the following conditions are met: 1. The holder of the instrument may sue in his/her own name. 2. Title to the instrument must pass on delivery, or on delivery and endorsement. 3. A "holder in due course" takes the instrument free from the defects in title of his/her predecessors. Essential Features of a Negotiable Instrument: 1. A Negotiable Instrument is a written instrument 2. Signed by the maker or drawer of the instrument A signature may be any symbol made by the maker or drawer with the present intention to be a signature. 3. It must contain an unconditional promise or order to pay A mere acknowledgment of a debt is not sufficient without evidence of an affirmative undertaking on the part of the debtor to repay the debt. 4. An exact sum of money (with or without interest in a specified amount or at a specified rate) must be stated. Fixed amount means an amount that can be determined from the face of the instrument. Payable in money means the medium of exchange authorized or...
Words: 2141 - Pages: 9
...Types of Commercial Paper The UCC identifies four basic kinds of commercial paper: promissory notes, drafts, checks, and certificates of deposit. The most fundamental type of commercial paper is a promissory note, a written pledge to pay money. A promissory note is a two-party paper. The maker is the individual who promises to pay while the payee or holder is the person to whom payment is promised. The payee can be either a specifically named individual or merely the bearer of the instrument who has it in his or her physical possession when he or she seeks to be paid according to its terms. A note payable to "bearer" can be paid to the person who presents it for remuneration. Such an instrument is said to be bearer paper. A promissory note that is payable on demand can be redeemed by the payee at any time, whereas a time note has a date for payment on its face that establishes the date when the holder will have an enforceable right to receive payment under it. There is no obligation to pay a time note until the date designated on its face. The ordinary purpose of a promissory note is to borrow money. Promissory notes should not be confused with credit or loan agreements, which are separate instruments that are usually signed at the same time as promissory notes, but which merely describe the terms of the transactions. A promissory note serves as documentary evidence of a debt. It can be endorsed and sold at a discount to other parties, and each subsequent endorser becomes...
Words: 5335 - Pages: 22
...Running Head: Negotiable Instruments Negotiable Instruments ACC 543 January 9, 2012 This memo attempts to analyze financial decisions problems with creating lines of credit from banks for the purpose of technological infrastructure investments. Explaining negotiable instruments will occur with recommended financing transactions. Comparing the main and secondary liabilities of the parties to the negotiable instruments and examining the parts of the secured transaction the bank recommends. This will be included in the memo. Negotiable instruments are transferable instruments used as a means of money for trading. These instruments are a promise to pay such as checks, drafts, promissory notes, and certificate of deposits. “A negotiable instrument has three principal attributes: (1) an asset or property passes from the transferor to the transferee by mere delivery or endorsement of the instrument, (2) a transferee accepting the instrument in good faith and for value obtains an indefeasible title and may sue on the instrument in his or her name, and (3) a notice of the transfer is not given to the party liable in the instrument. “ (Business Dictionary, 2012) This business wants to create a line of credit from the bank to invest money in technological infrastructure. A draft can be the negotiable instrument to use with a line of credit. Drafts contain three parties, the drawer, the drawee, and the payee. The drawer creates instructions to demand the drawee...
Words: 969 - Pages: 4
...NEGOTIABLE INSTRUMENTS ACT,1881 Definition of a Negotiable Instrument. The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881. It is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques. The Act does not affect the custom or local usage relating to an instrument in oriental language i.e., a Hundi. The term "negotiable instrument" means a document transferable from one person to another. However the Act has not defined the term. It merely says that "A .negotiable instrument" means a promissory note, bill of exchange or cheque payab1e either to order or to bearer. [Section 13(1)] A negotiable instrument may be defined as "an instrument, the. property in which is acquired by anyone who takes it bona fide, and for value, notwithstan~ing any defect of title in the person from whom he took it, from which it follo~s that an instrument cannot be negotiable unless it is such and in such a state that the true owner could transfer the contract or engagement contained therein by simple delivery of instrument" (Willis- The Law of Negotiable Securities, Page 6). According to this definition the following are the conditions of negotiability: (i) The instrument should be freely transferable. An instrument cannot be negotiable unless it is such and in such state that the true owner could transfer by simple delivery or endorsement and delivery. (ii) The person who takes it for value...
Words: 15663 - Pages: 63
