Secured Transactions and Commercial Paper
HOW ESSAYS ARE SHOULD BE ANSWERED;
1) DO WE HAVE A NEGOTIABLE INSTRUMENT? 2) DEFINE WHAT NEGOTIATION IS 3) WHAT TYPE OF HOLDER (HOLDER OR HDC)?
extension of contracts to a specific type of promissory note/commercial paper/transaction.
Use the names of the parties in the fact pattern. Payor, payee, maker, etc. will get confusing and can confuse the grader.
Negotiable Instruments (UCC Article 3)
What is tested? Almost always, the Bar will test "Negotiation and HDC on a UCC 3 essay.
Negotiable Instrument: First step in every Article 3 hypo is determining whether a negotiable instrument exists.
1.A writing 2. Signed by Maker or Drawer 3. Contains unconditional promise/order to pay certain sum of money 4. Payable on demand or at definite time 5. Payable to order or to bearer
Note: A draft, check, certificate of deposit and note MAY OR MAY NOT be a negotiable instrument depending upon whether the elements of negotiability are satisfied.
Types of Negotiable Instruments :
Draft: An order in writing directing a person, other than the maker, to pay a specified sum on money to a named person.
> Check: A draft drawn upon a bank and payable on demand, signed by the maker or drawer, containing an unconditional promise to pay a sum certain in money to the order of the payee.
> Cashier's Check: Issued by the authorized officer of a bank, directed to another person, evidencing the fact that the payee is authorized to demand and receive upon presentation from the bank the amount of money represented by check. The cashiers check is drawn upon the banks own account and not that of a private person and as such it 1) has a much higher guarantee that it will be honored and is 2) accepted for many transactions where a personal check would not be.
Note: A writing acknowledging a debt and promising payment. (ex. Mortgage is a promissory note).
Promissory Note: A note; a kind of negotiable instrument wherein the maker agrees to pay a certain sum at a definite time.
Negotiation: The transfer of a check, promissory note, bill of exchange, or other negotiable instrument to another in exchange for money, goods, services, or other benefit Negotiation is more simply put just an assignment of these negotiable instrument.
Indorsement: A signature placed upon the back of an instrument, with or without other words, whose effect is to transfer the instrument and create a "new and substantive contract by which the INDORSER becomes a party to the instrument and liable, on certain conditions, for its payment.
> Checks may be indorsed for DEPOSIT ONLY. That way if the check is lost or stolen it cannot be cashed.
Transfer: An instrument is transferred when it is delivered by a person other than its issuer for the purpose of giving to the person receiving directly the right to enforce the instrument.
Transfer Warranties (MUST KNOW): A person who transfers an instrument for consideration warrants to the transfere