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1、1RegulationModule 25: Commercial PaperInstructor: Helen08/16/20092Commercial PaperM25A. General Concept of Commercial PaperB. Types of Commercial PaperC. Requirements of NegotiabilityD. Interpretation of Ambiguities in Negotiable InstrumentsE. NegotiationF. Holder in Due Course (HDC)G. Rights of a H
2、older in Due CourseH. Liability of Parties3A. General Concepts of Commercial Paper4AGeneral Concepts of Commercial Paper1. Why Use Commercial Papera)Used as a substitute of moneyb)Used as extension of creditEx. checksEx. due in one year2. Negotiable Commercial Papera)Negotiable commercial paper is g
3、overned by Article 3 of UCCb)Nonnegotiable commercial paper is governed by ordinary contract law3. Approach to most Qsa)What types of paper is it?b)Is the instrument negotiable?c)Is the holder qualified as a HDC?d)Does the drawer/maker have a personal/real defense?5B. Types of Commercial Paper6BType
4、s of Commercial Paper1. Draft2. Notea) 3 parties: Drawer, Drawee, and PayeeEx. checksdate Pay to the order of $PayeeDrawer(signed)Draweeb) Payable on demand (unless postdated)a) 2 parties: Maker and PayeeI promise to pay to the order of date $PayeeMaker(signed)b) Payable on demand or at a definite t
5、imeEx. Certificate of Deposit (CD)7Question Time1. Which of the following statements regarding negotiable instruments is not correct?a)A certificate of deposit is a type of noteb)A check is a type of draftc)A promissory note is a type of draftd)A certificate of deposit is issued by a bank8C. Negotia
6、bility Requirements9CRequirement of Negotiability1.Be in writing2.Be signed by maker/drawer3.Contain an unconditional promise or order to pay4.Be a fixed amount of money only5.Be payable on demand or at a fixed time6.Be payable to order or bearer(FAMOUS!) Order = payable to the order of a specified
7、party Bearer = payable to anyone who possess itPay to the order of order paper Pay to A or order - order paper Pay to A not negotiable unless check Pay to bearer bearer paper Pay to cash bearer paper Pay to order of bearer bearer paper Pay to order of cash bearer paper Pay to order of - bearer paper
8、 unless a name inserted30 days after date = okay 30 days after Uncle Joes death = no!10Question Time1. Under the Commercial Paper Article of the UCC, for a note to be negotiable it must a)Be payable to the order or to bearerb)Be singed by the payeec)Contain references to all agreements between the p
9、artiesd)Contain necessary conditions of payment11Question Time2. A draft made in the U.S. calls for payment in Canadian dollara)The draft is nonnegotiable because it calls for payment in money of another countryb)The draft is nonnegotiable because the rate of exchange may fluctuate thus violating th
10、e sum certain rulec)The instrument is negotiable if it satisfies all of the other elements of negotiability d)The instrument is negotiable only if it has the exchange rate written on the draft12D. Interpretation of Ambiguities13DInterpretation of Ambiguities1. Contradictory Terms2. Omissions3. Other
11、 Issuesa)Words control over figures b)Handwritten terms control over typewritten and preprinted terms c)Typewritten terms control over printed termsa)Omission of date = okay unless used to determine when payableb)Omission of interest rate = okay (judgment rate of interest is used)a)Instrument may be
12、 postdated or antedated and remain negotiableb)Instrument may have a provision by endorsing or cashing itc)Instrument may be payable to order of more than 1 persond)If not clear whether instrument is draft or note, holder may treat it as eithere)Under UCC, only negotiable instrument need be written1
13、4Question Time1. Wyden holds a check that is written out to him. The check has the amount in words as five hundred dollars. The amount in figures on this check states $200. Which of the following is correct?a)The check is cashable for $500b)The check is cashable for $200c)The check is not cashable b
14、ecause the amounts differd)The check is not cashable because the amounts differ by more than 10%15E. Negotiation16ENegotiation1. There are 2 Methods of Transferring Commercial Papera) By assignmentb) By negotiationWhen paper is nonnegotiableWhen paper is negotiable Occurs when transfer does not meet
15、 all requirements of negotiability Assignee can obtain only same rights that assignor had(FAMOUS!) Holder may obtain more rights than what transferor had 2 methods of negotiationNegotiating Order paper = endorsement by transferor + deliveryNegotiating Bearer paper = mere delivery17ENegotiation2. The
16、re are 4 Types of Endorsementsa) Blank Endorsement Does not specify any endorsee Only a signature by payee Converts order paper to bearer paper If it was lost, any one who finds it will be a valid holder(back)John Smith18ENegotiation2. There are 4 Types of Endorsementsb) Special Endorsement Indicates specific person endorser wishes to negotiate instrument Pay to order of need not required on back as endorsement
