CH23&25_Negotiables.notebook

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December 20, 2018

Aug 18­9:58 AM

Kinds of Negotiable Instruments ­ Chapter 23

2 min ­ Frank Abagnale ­ Check Fraud2min clip from movie

Aug 18­11:09 AM

A negotiable instrument is a written document that may be transferred by endorsement or delivery, giving special legal rights to the transferee.

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December 20, 2018

Aug 18­11:09 AM

DraftsA draft is an order by one person to another person to pay money to the order of a third person

Sarah

James

April 1

$160.00Sixty and 00/100 ­­­­­­­­

James

The one who is to receive the $ is the payee. (Sarah)

The one who orders the $ to be paid is the drawer. (James)

Aug 18­11:09 AM

Drawers are responsible for altered or forged checks if their negligence was contributory; otherwise the bank bears the loss.

So what should we do to prevent someone altering/forging a check of ours?o Place figures close to the dollar sign o Start writing amounts and the payee's name at the far left and draw a line in the

remaining space. o If there's a difference between the numbers and the words, the bank will honor the

written amount. o If you make a mistake, write VOID across the check and write a new one.

https://www.youtube.com/watch?v=tLdvyPFj_Z8

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December 20, 2018

Aug 18­11:09 AM

Writing Checks• A form is not required.

So what may we write a check on... what does banking law require a check to be on?

Aug 18­11:09 AM

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December 20, 2018

Aug 18­11:09 AM

What happens to a check that is written?

Aug 18­11:09 AM

Notes

A note (promissory note) is a written promise by one person, called the maker, to pay money to another person, the payee. • City Finance Co. lends $50,000 to Jane. oJane is the maker, City Finance is the Payee.

• It can be negotiated (transferred) to other people. • A demand note is payable whenever the payee demands payment. • A time note is payable at a specified future date. (next Wednesday or April 1, 2034)• An installment note is paid in a series of payments. (monthly until April 15, 2056

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December 20, 2018

Aug 18­11:09 AM

Certificates of Deposit

A form of note!!

A certificate of deposit (CD) is a bank's written acknowledgment of the receipt of money and its promise to pay back the money, usually with interest, on the due date. (3 month, 6 month… 2 year, 5 year CDs)

Is a CD a time note or an installment note?

Aug 18­9:37 AM

Transferring Negotiable Instruments ­ Chapter 25

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December 20, 2018

Aug 18­9:37 AM

Assignment ­ transfer of rights under a contract with someone else

Negotiation ­ is the transfer of an instrument in such a way that the transferee (new recipient) becomes the holder.

A holder is a person who possesses a negotiable instrument payable to the person holding it or to "bearer".

Key point: The instrument is negotiated when the payee transfers it in the proper manner to another holder.

Ronald receives a check from Danielle. Ronald (payee/holder) may assign/transfer the check to Alyson (the new holder).

At what point has the check been "negotiated"?

Aug 18­9:37 AM

Bearer Instruments

o Payable to the order of “CASH”o If the instrument uses the word "bearer," it means that the

payment will be made to anyone who bears, or possesses, it. o May be negotiated (transferred) by delivery only

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December 20, 2018

Mar 18­10:35 AM

Why should we not make checks out to "CASH"?

Aug 18­9:37 AM

• An endorsement (a/k/a indorsement) is the act of signing the back of an instrument for the purpose of transferring it to someone else.

• The endorsement must be for the entire amount stated on the instrument.

Endorsing

checks ­

5min

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December 20, 2018

Aug 18­9:37 AM

#1 Blank Endorsement

o Simply signing an order instrument on the back. o The instrument then becomes a bearer instrument and can be paid to anyone.

o FYI: If the name on the face is incorrect, the payee may endorse in the correct or incorrect name.

I will show you how easy it is to be the

victim of check fraud... wait a few slides.

Aug 18­9:37 AM

#2 Restrictive Endorsement

o words have been added that limit the use of the instrument followed by the signature (i.e. "For deposit only")

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December 20, 2018

Aug 18­9:37 AM

#3 Special Endorsement aka “full endorsement”

o The act of writing on the back of an instrument an order to pay to a specific person.

o "Pay to the order of... " then a signature

Mar 4­10:39 AM

If you write a "blank endorsement"...

And the check then ends up in the wrong hands...

The person may just add these words... and what do we now have?

http://articles.orlandosentinel.com/2010­01­25/news/os­casey­anthony­check­hearing­20100125_1_george­and­cindy­anthony­check­fraud­charges­plead

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December 20, 2018

Aug 18­9:37 AM

Warranties of Endorsers

The endorse warrants that:

• they have good title (ownership) to the instrument • all signatures are genuine • the instrument hasn't been altered

You are not off the hook yet!!!Every endorser agrees under implied contract to pay any subsequent holder the face amount of the instrument if it is dishonored.

PC ­ 11min.

Mar 23­7:13 AM

http://www.uniball­na.com/main.taf?p=9

http://www.youtube.com/watch?v=2WKBaZKiBSc

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December 20, 2018

Mar 18­10:33 AM