I. INTRODUCTION: TYPES OF NEGOTIABLE INSTRUMENTS

Money: UCC defines money to mean a “medium of exchange currently authorized or adopted by a domestic or foreign government” 1-201(24). * *
The Functions of Money
(1) Medium of Exchange
Cures two problems with bartering:
Double coincidence of wants, e.g. you have a horse you want to trade, and you want a cow—now you need someone who has a cow, and wants a horse.
Depreciable commodities
(2) Store of Value
Money may be used as a store of value.
Not all stores of value are money.
(3) Unit of Account
Unit in which prices are stated and accounts maintained.
(4) Statement of Deferred Payment
Measure of what must be paid in long-term transactions like loans and annuities.

What is Payment Systems?
Concerned with the law governing the payment component of commercial transactions. This is the law applicable not to money itself, but to the various substitutes for money.
Payments law is not derived from principles of “higher law.” Instead, it is instrumental—designed to facilitate commercial transactions. One way to view payment law is as creating a set of default rules. These rules are designed to establish what the parties would otherwise do for themselves, if they were able to bargain about what the rules would be.
Presumably, people would like to reduce transaction costs. So how do we determine what the parties would have chosen? We engage in a “thought experiment” and imagine what kind of bargain parties would strike. Self-interested parties prefer more of a good thing, so most bargainers would agree to a rule that makes them both better off. They prefer lower costs over higher costs, so as to increase the total value of the exchange. In some cases, parties do not care about maximizing value—in such situations, parties can opt out, i.e. explicitly contract out of the default rules.

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