Exam 19: Negotiable Instruments

Explain how time drafts can be used as a means of finance for a business drawing them.

On a piece of paper,A writes a memo that sets out the name of his bank,his bank account number,and a statement indicating that the bank is required to pay to B whatever amount B desires.A then puts his signature at the bottom and gives the memo to B.In this case,the memo is

A court in British Columbia decided that a promissory note payable at a variable interest rate (e.g. ,prime + 1% per annum)was not a negotiable instrument.Why might the court make this decision? How might the decision affect the rights of a third party obtaining the promissory note through endorsement?

Use the fact situation below to answer the questions that follow. Albert prepares a cheque and has it certified at his bank.However,on his way home,Albert loses the cheque.Albert immediately advises his bank of the loss of the certified cheque,puts a stop payment on it,and asks the bank to replace it with another certified cheque. In this case,if the certified cheque is negotiated,

Describe the difference between a bearer instrument and an order instrument.

A promissory note is presented for acceptance.

A demand draft is

A buyer on consumer credit has no defence against a finance company that sues him as holder of his promissory note.

Who is the drawer of a bill?

A holder in due course who suffers a loss arising from a forged endorsement can recover from the party who acquired the instrument immediately following the forgery.

Describe the difference between a bearer instrument and an order instrument.

A promissory note is not a bill of exchange.

A forges his signature on a cheque made in favour of B,who then endorses it to the order of C.C then endorses the cheque to the order of D,who has no way of knowing that the cheque has been forged.In this case,

Negotiability is the special quality possessed by negotiable instruments.

Many retail businesses have taken steps to minimize the risks associated with negotiable instruments.These steps include

Jack writes a note for Mary.The note states,"I,Jack,promise to pay you,Mary,$500.00 on January 4,2003,or anytime after that date when a demand is made." Jack has given Mary a

Explain the difference between negotiable instruments and other contracts.

Delivery of a negotiable instrument in payment

Albert owes George a sum of money and gives George a cheque made out to George for the amount he owes.In this case,George is

Use the fact situation below to answer the questions that follow. John owes Edward a sum of money and gives Edward a cheque made out to Edward for the amount he owes.Edward also owes a sum of money to Albert,and on receiving the cheque from John,Edward signs his name only on the back of the cheque. When Edward delivers the cheque to Albert,the cheque becomes