Simply writing a check to someone who accepts payment is not accepting theĬheck in the very narrow meaning of the Code’s use of that term. Issuing the cashier’s check, the bank has entered into an agreement to pay theĬheck when it is ultimately presented (probably by Susan or her bank). Note the same would be true if the check was Possession of the check and it is payable to her. Once Roy gives Susan the check, she becomes a holder because she is in Of the check, but since the check is payable to Susan, Roy cannot be a holderĮither until Roy gives her the check. The bank draws on his own account, called a cashier’s check, made He goes to his bank and gets a check that Instrument, the first person is said to be issuing the instrument and the Paper payable to “bearer” is comparable to a check made out to “cash.” When a maker or drawer first transfers an To a specific person or to the “bearer,” who is in possession of a note at any The note is made in favor of the holder, who is in Who issues or creates a note, and is typically a borrower in the The drawer writes the check thatĭirects a drawee, usually a bank, to pay it. Motor vehicle which are separate from the rights and responsibilities of pedestrians ĭesignations people can have at any given time and a person’s designation may defineĮxample, a motorist has a set of rights and responsibilities when operating a Which are typically used in large international transactions. Article Five addresses letters of credit, Regulates the payments system itself, including check collection, credit andĭebit cards and electronic funds transfers. Loan obligation agreements and “I owe you” notes are examples The personal check is a commonly used draft. Regulates negotiable instruments, which are widely-used types of commercial All states have adopted a model law called the UniformĬommercial Code to regulate business transactions, albeit not all in Both federal consumer law and state law, along with private industryĪrrangements and international agreements, govern the modern commercial Substitute money item that allowed them to use debts owed to them as a form of Which merchants could separate money from the obligation entitling them toĬollection. In the Middle Ages called the “law merchant,” which was a collection of rules by These debts were part of a system developed This paper served as evidence of a merchant’sĭebt that a creditor could, in turn, use as money. That is, the indorser may be liable for paying an instrument that is dishonored when presented.Early days of commerce, merchants did not want to carry gold and silver forįear of being robbed so they started accepting paper as payment. This is very important for purposes of enforcement and liability if the instrument is not paid when validly presented by a subsequent holder. The holder of the instrument has the right to force the transferor to indorse the instrument. Note: Indorsement is not generally required for bearer paper, as the holder is not necessarily named on the instrument. A thief or finder of bearer paper, however, may become a holder. They do not legally become a holder because the signature (a required element of negotiation of order paper) is not present. This excludes individuals who forge a signature on order paper. A holder must be entitled to enforce the instrument. Note: The transferee may become a holder upon transfer. If an individual acquires paper by a method other than negotiation, she is a transferee and not a holder of the paper. Negotiation means that an instrument has been transferred (either voluntarily or involuntarily) to the holder by someone other than the issuer. Update Table of Contents How is commercial paper negotiated to a holder? Discussion Question Practice Question Academic Research How is commercial paper negotiated to a holder?
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