Exam 20: Creation and Transfer of Negotiable Instruments

Which of the following is the best description of an indorsement?

Regarding a certificate of deposit,the depositor is the maker of the instrument.

A blank indorsement does not specify a particular indorsee.

Identify the following instrument,identify the role of each party,and identify the characteristics of the instrument. $\quad$$\quad$ To: Morgan Associates $\quad$$\quad$$\quad$$\quad$$\quad$ Date: May 7,2011 $\quad$$\quad$ Pay to the order of: Henry H.Higgins, $\quad$$\quad$ One thousand and 00/100 Dollars,on June 7,2011 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\underline{\text{Mareena Kaluchi}}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Mareena Kaluchi

A time draft is payable at a designated future date.

Determine whether the following instrument is a negotiable instrument,addressing all the requirements of negotiability in your response. "I,Orville Wright,promise to pay $5,000 to Billy's Bicycle Parts in four equal installments of principal,beginning on January 1,2012,and on the same day in each of the next three years.Each payment will consist of $1,250 in principal,plus interest accrued since the date of this note,in the case of the first payment,or since the prior payment in the case of all other payments.Interest shall accrue at the rate of 8% per annum,or in the event of default,at the maximum rate allowed by law until the default is cured.This note is secured by collateral consisting of various experimental flying machines.This note may be paid in whole or in part prior to the due dates,and the interest accrued will be reduced accordingly.The due date for any payment under this note may be extended by mutual agreement of the parties up to six months from the due date as stated herein.The proceeds of this note will be used by Orville Wright to further his aviation experiments,and in the event those experiments are unsuccessful,the payment obligation is canceled. $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Signed: $\underline{\text{Orville Wright}}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Date: 1/1/11

The term "instrument" means "negotiable instrument."

To be unconditional,a promise to pay cannot refer to another writing.

Which type of indorsement indicates that the proceeds from an instrument must be deposited into a bank account?

In order to meet the writing requirement of a negotiable instrument,the writing must:

A(n)________ is a ________ draft that arises when credit is extended with the sale of goods.

The financial institution upon which a check is written is the accommodation party.

Which of the following is true about the assignment and the negotiation of a negotiable instrument?

The signature on a negotiable instrument must be handwritten and in ink.

A special indorsement creates bearer paper.

If there is no room on an instrument for an indorsement,the indorsement may be written on a separate piece of paper called an allonge.

One of the common functions of negotiable instruments is as a substitute for money.

An instrument that is payable to a specific payee or indorsed to a specific indorsee is order paper.

Checks are often indorsed to attorneys,executors of estates,real estate agents,and other fiduciaries in their representative capacity for the benefit of clients,heirs,or others.These indorsements are called ________.

Negotiation is the transfer of commercial paper by a person other than the issuer.