Business & Personal Law: Unit 4 Your Money and the Law

To be negotiable, an instrument

• can be for a fixed or flexible amount of money

• must bear the signature of the drawee or acceptor

• can be oral or written

• must be payable on demand or at a definite time

The laws of negotiable instruments are governed by the

• UCC

• FTC

• FDIC

• CDD

When you receive a check made out to you in your name, you are called the

• maker

• holder

• assignee

• drawer

When the date is omitted

• the date when the instrument is negotiated is considered the date of issue

• the instrument must be returned and the date inserted

• the date when the instrument is received is considered to be the date of issue

• the instrument is not negotiable

There are two basic kinds of negotiable instruments:

• drafts and bonds

• drafts and checks

• notes and CDs

• notes and drafts

A blank indorsement

• requires the words "without recourse" on the back of the check

• requires the words "with recourse" on the back of the check

• consists of the signature alone on the instrument

• requires the words "pay to the order of" on the back of a check

An assignment is

• a restrictive indorsement that allows for the transfer of an instrument from one party to another

• a negotiable instrument payable to the order of the person holding it

• the transfer of an agreement in such a way that the transferee becomes a holder

• the transfer of your rights under a contract to someone else

A holder in due course is a holder who

• accepts all liability for the paying of the instrument

• is found with a fraud in the inducement

• takes an instrument for value, in good faith, and without notice

• accepts a properly negotiated instrument

A bad check is one that

• the bank deems to old to honor

• the bank is liable for any loss that you might suffer

• is drawn on an account in which there is insufficient funds

• is signed by someone other than the drawer

The Check 21 Act

• requires you reconcile your bank account within 21 days of receiving your statement

• allows electronic processing to clear checks quickly and safely

• provides for oral stop-payment orders that are binding

• authorizes the use of restricted debit cards by minors