Chapter 31 - Negotiable instruments. After studying this chapter you will be able to understand: Explain advantages of commercial paper and the requirements to qualify as a negotiable instrument, identify different types of negotiable instruments and the key features, apply UCC rules for situations when the terms of an instrument are ambiguous or inherently conflicting. | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 7 Negotiable Instruments Negotiation and Holder in Due Course Liability of Parties Checks and Electronic Transfers Commercial Paper P A R T Negotiable Instruments P A E T R H C 31 We at Chrysler borrow money the old-fashioned way. We pay it back. Lee Iacocca, Chairman and CEO of Chrysler Corporation, quoted in the New York Times (1983) Learning Objectives Explain advantages of commercial paper and the requirements to qualify as a negotiable instrument Identify different types of negotiable instruments and the key features Apply UCC rules for situations when the terms of an instrument are ambiguous or inherently conflicting Commercial paper refers to checks, promissory notes, & certificates of deposit Basically a contract for payment of money Commercial paper may be negotiable: Transferred from party to party and accepted as a money substitute payable immediately (check) or as credit . | Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 7 Negotiable Instruments Negotiation and Holder in Due Course Liability of Parties Checks and Electronic Transfers Commercial Paper P A R T Negotiable Instruments P A E T R H C 31 We at Chrysler borrow money the old-fashioned way. We pay it back. Lee Iacocca, Chairman and CEO of Chrysler Corporation, quoted in the New York Times (1983) Learning Objectives Explain advantages of commercial paper and the requirements to qualify as a negotiable instrument Identify different types of negotiable instruments and the key features Apply UCC rules for situations when the terms of an instrument are ambiguous or inherently conflicting Commercial paper refers to checks, promissory notes, & certificates of deposit Basically a contract for payment of money Commercial paper may be negotiable: Transferred from party to party and accepted as a money substitute payable immediately (check) or as credit (promissory note) Overview UCC Article 3 (Negotiable Instruments) and Article 4 (Bank Deposits and Collections) cover commercial paper Other negotiable documents (documents of title, investment securities) covered by other sections Two basic types of negotiable instruments: Promises to pay money Orders to pay money The Uniform Commercial Code Promissory notes and certificates of deposit issued by banks are promises to pay money Promissory note: two-party instrument in which the maker promises unconditionally in writing to pay the payee, a person specified by the payee, or the bearer of the note, a fixed amount of money (with or without interest) either on demand or at a specified, future time [3–104] Promises to Pay Money Figures 1 and 2 on pages 826 and 827 are examples of promissory notes. A certificate of deposit is an instrument containing (1) an acknowledgment by a bank that it has received a deposit of money and (2) a promise by the bank to repay the sum of money .
