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Chapter 20
Law for Business Chapter 20 Definitions
| Term | Definition |
|---|---|
| Negotiable instrument or commercial paper | Writing drawn in special form that can be transferred as substitute for money or as instrument of credit |
| Law merchant | Rules applied by courts set up by merchants in early England |
| Negotiation | Act of transferring ownership of negotiable instrument |
| Holder in due course | Person who acquires rights superior to original owner |
| Order paper | Commercial paper payable to order |
| Bearer paper | Commercial paper payable to bearer |
| Draft or bill of exchange | Written order by one person directing another to pay a sum of money to a third person |
| Promissory note | Unconditional written promise to pay sum of money to another |
| Payee | Party to whom instrument is payable |
| Drawer | Person who executes a draft |
| Drawee | Person ordered to pay a draft |
| Acceptor | Person who agrees to pay a draft |
| Maker | Person who executes a note |
| Bearer | Payee of instrument made payable to whomever is in possession |
| Indorser | Payee or holder who signs back of instrument |
| Indorsee | Named holder of indorsed negotiable instrument |
| Electronic fund transfer | Fund transfer initiated electronically, telephonically, or by computer |
| Check truncation | Shortening a check's trip from payee to drawer |
| Preauthorized debit | Automatic deduction of bill payment from checking account |
| Preauthorized credit | Automatic deposit of funds into an account |
| Automated teller machine | EFT terminal that performs routine banking services |
| Point-of-sale system | EFTs begun at retailers when customers pay for goods or services |
| Two types of negotiable instruments | Checks and notes |
| Indorsement | Signature of the owner made on the back of a negotiable instrument before delivery |
| Order paper and bearer paper | Order paper is negotiated only by indorsement of the person to whom it is then payable and by delivery of the paper to another person. Bearer paper can be transferred by being handed to another person. |
| Classification of Commercial Paper | Drafts Promissory notes |
| Negotiation and assignment | The rights given original parties are alike in the cases of negotiation and assignment. The rights given to subsequent parties depend on if the instrument is transferred by assignment or negotiation. |
| Credit and collection | A draft can be an instrument of collection that a seller draws on a buyer. |
| EFTs | The EFTA requires disclosure of the terms and conditions of the EFTs involving a customer's account. These notifications include: 1. What liability could be imposed for unauthorized EFTs 2. What type of EFTs the customer may make 3. The EFT charges |
| Types of EFTs | Check truncation, preauthorzied debits and credits, automated teller machines, point-of-sale systems |
Created by:
JuliRae
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