Exam 20: Creation and Transfer of Negotiable Instruments

Many lending institutions offer ________ loans.These loans tie the interest rate to some set measure,such as a major bank's prime rate or another well-known rate; as a result,the interest changes during the life of the loan.

When proper negotiation occurs,it is possible for the new holder to get better rights than the person that transferred the instrument to them.

Identify the following instrument.Fully explain. $\quad$$\quad$ To: Third National Bank of Levittown $\quad$$\quad$$\quad$ Date: January 1,2011 $\quad$$\quad$ Pay to the order of: Kathy Young, $\quad$$\quad$ One thousand and 00/100 Dollars,on March 15,2011 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\underline{\text{Michael Alan}}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ Michael Alan

In an assignment,the assignee cannot receive greater rights than those held by the assignor.

An instrument can be a sight draft or a demand draft but cannot be both.

The drawee becomes liable to pay a draft:

On January 10,2011,Jonathan writes a check,payable to Josh in the amount of $500.00,drawn on Jonathan's account with MBNA bank.Josh,on the back of the check,writes,"Pay to the order of Brandi" and leaves the check on his night stand.Brandi comes to visit while Josh is not home (she has a key),sees the check,and takes it believing that it was indorsed to her a repayment of a debt.Brandi then signs her name on the back of the check and hands it to Lori as a birthday present.

When the name of a payee or indorsee is misspelled,the payee or indorsee must indorse the instrument in both the correctly spelled name and in the name as misspelled.

A transfer of an instrument where the transferee can never acquire better rights than the transferor is called a(n):

Once created,a negotiable instrument can be transferred to subsequent parties by:

If sufficient credible witnesses are brought forth,an oral statement can be held to be a valid negotiable instrument.

If requirements established by Article 3 of the Uniform Commercial Code are met,a transferee who qualifies as a holder in due course takes the instrument free of many defenses that can be asserted against the original payee.

All negotiable instruments can be classified into which two general categories?

The essence of the fixed amount requirement is that a holder of an instrument can calculate the payment required from the face of the instrument.

A promissory note is a two-party instrument.

The UCC recognizes five types of negotiable instruments.

Which of the following is not one of the general kinds of indorsements?

Grandma has sent you a properly-completed check which states that it is payable for $500.00 upon your graduation from college.This would be a negotiable instrument if signed properly.

A sight draft or time draft are both payable on demand.

Examples of negotiable instruments include checks and promissory notes.