MANGMT 3540 1st Edition Lecture 18 Outline of Last Lecture I Equitable vs Legal Remedies II Types of Equitable Remedies III Election of Remedies Outline of Current Lecture IV Commercial Paper V Two Types of Negotiable Instruments VI Six Requirements for negotiability VII Negotiation Legal Transfer VIII Indorsement Current Lecture I Commercial Paper gives special rights to the holder A Commercial paper refers to a class of documents typically negotiable instruments which can be freely transferred in commerce and give special rights to those who hold them II Two Types of Negotiable Instruments A Order Paper i Contains an order by one person for another to pay ii Ordinarily 3 parties involved These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 1 Drawer person signing order paper person giving an order to draw from an account with another person 2 Drawee person or entity ordered to pay 3 Payee name optional person who is originally to be paid iii Draft order issued by drawer for a drawee to pay generic order paper iv Check draft payable on demand in which bank is drawer B Promise Paper i Contains a promise by one party to pay another ii Ordinarily 2 parties involved 1 Maker person who makes the promise to repay 2 Payee person whom promise is made iii Promissory note promise by maker to pay a sum of money to payee at a future time generic promise paper 1 E g For value received maker promises to pay Gwen Johnson the sum of Five million dollars payable one year from date with 9 interest iv Certificate of deposit note of bank acknowledging deposit and promising to pay at future time with interest C Holder i Person in possession of properly negotiated negotiable instrumentproperly transferred from one owner to another One can hold a check a promissory note or a mortgage III Six Requirements for negotiability A An instrument in writing B Signed by maker or drawer C Containing unconditional un equivocal promise or order to pay i Acknowledgement of debt not enough ii IOU is not negotiable need a promise or order iii If conditional on any performance non negotiable 1 Example I promise to pay X if X delivers goods conditional iv I may or may not pay equivocal D A sum certain in money i Must be able to ascertain from the face text of the instrument the minimum amount due ii Okay to state interest variable with a public interest rate like the prime rate iii Penalties or attorney s fees in the event of default are OK iv Money only not commodities such as gold silver grain cattle E Payment due on demand or at definite time i On demand whenever the holder demands payment ii Definite time 1 State time or date when due 2 Stated paid after stated date OK iii An acceleration clause does not destroy negotiability iv Postdating does not affect negotiability may be ignored by subsequent holders F Payable to order or bearer i Words of negotiable ii Order instruments pay to the order of name payee iii Bearer instrument pay bearer or pay cash 1 To order of bearer or cash IV Negotiation Legal Transfer A First delivery i Delivery from original maker or drawer to payee or intended recipient is sufficient to negotiate the instrument and transfer legal title The transferee becomes the holder B After first delivery i Bearer instrument physical delivery alone negotiates the instrument ii Order instrument physical delivery and a necessary indorsement by transferor negotiates the instrument C Transferor i Could be payee ii Could be indorsee person to whom previously indorsed V Indorsement A Definition signature of transferor of a negotiable instrument usually on the back B Parties i Transferor indorser ii Transferee recipient indorsee