Notecards I made from Wiley's 2012 CPA Exam Review
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| show | used as substitute for money, used as extension of credit
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| When do laws the favorable laws of Article 3 of the UCC apply to commercial paper? laws of ordinary contract law? How(where) is this difference determined? | show 🗑
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| show | 1.A draft(bill exchange)-3 parties one person(drawer) orders another(drawee) to pay 3rd party(payee) i.e a check
2.Note(promissory note)-one party(maker) promises pay specified sum to another party(payee), must be payable on demand/definite time i.e a CD
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| show | be written, signed by maker or drawer, contain unconditional promise or order to pay, state a fixed amount of money, payable on demand or definite time, payable to order or bearer unless it is a check
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| What counts as a signature of a maker or drawer on a negotiable instrument? | show 🗑
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| show | No it is conditional then and destroys negotiability
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| show | may state instruments purpose, may refer to or state it ARISES(not subject to) from another agreement, show its secured by collateral, contain promise to provide extra collateral, limit payment from a particular fund
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| show | 1.usually in a note, must be affirmative obligation to pay (not acknowledgement of debt)
2.contained in a draft, is a command to drawee to pay (on a check this is the word pay)
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| show | 1.No only the principal must be clearly stated on the instrument
2.Yes, even if formula or amount requires reference to other info outside of instrument
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| show | 1.No
2.No
3.No because reduce risk and promote transferability
4.No, option to be payable destroys negotiability because of POSSIBILITY payment isn't made in money
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| What does the term payable on demand include? Payable at a definite time? | show 🗑
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| show | 1.if made payable to the order of Any person(includes maker/drawer), two person together or alternatively, any entity, or payable "to A or to order"
2.No must include 'to the order of' (excludes checks)
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| When is a negotiable instrument made payable to a bearer? | show 🗑
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| show | 1.Words over figures
2.handwritten over typewritten over printed(typeset)
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| show | 1.Yes (payable on demand then) unless the date is necessary to determine when its payable
2.yes because the judgment rate(rate used on court judgement) is then automatically used
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| Can an instrument be postdated or antedated and remain negotiable? | show 🗑
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| Can an instrument be negotiable and have a provision on it that by endorsing/cashing it the payee acknowledges full satisfaction of debt? What happens if an instrument is payable to the order of more than one person? | show 🗑
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| show | 1.Holder may treat it as either
2.needs to be written, lend itself to permanence, and be easily transferable
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| What are the two methods of transferring commercial paper? | show 🗑
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| In terms of negotiation of transfered commercial paper, who is a holder? What are the two methods of negotiation that can occur in transferring commercial paper? | show 🗑
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| What does endorsement mean in transferring commercial paper? What are the types? | show 🗑
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| What is a blank endorsement? | show 🗑
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| What is a special endorsement? How can bearer paper be converted into order paper with this endorsement? | show 🗑
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| What are the valid restrictive endorsements that can be made in transferring commercial paper? Examples of Invalid? Can endorsements affect negotiability? | show 🗑
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| What is the purpose of a qualified endorsements? How is it worded? | show 🗑
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| What are the combination of endorsements that may occur? | show 🗑
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| If a payees name is misspelled, how can the payee endorse the instrument? Can an endorsee make a requirement? | show 🗑
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| show | 1.Yes transferee may require endorsement from transferor
2.NO, check is still negotiable
3.other negotiable instruments would become nonnegotiable if they have a statement stating as such
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| How is a taker of instrument be a holder in due course? | show 🗑
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| What is a holder in due course(HDC)? KNOW THIS | show 🗑
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| show | pay/perform agreed consideration, gives another negotiable instrument, acquires security interest in instrument. promise for future performance doesnt count
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| show | 1.he knows or has reason to know
2.default on principal. interest doesn't count, check payable on demand overdue 90 days after date
3.obvious sign of of forgery calls into question authenticity, instrument is incomplete, has notice of parties claim
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| What if notice instrument is overdue/dishonored/person has claim is acquired after becoming holder & giving value can you still be a HDC? | show 🗑
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| Is there notice of a defense or claim making HDC impossible if the instrument is antedated/postdated? He knows there has been a default in payment of interest? The note was purchased at a discount? | show 🗑
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| show | transfer cuts off all personal defenses against a HDC. Real(universal) defenses are still assertable as the are assertable against any party.
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| show | breach contract(including breach warranty), lack consideration, prior payment, unauthorized completion, fraud in inducement, nondelivery, ordinary duress/undue influence(extreme=real defense), mental capacity/illegality(if law make trans voidable), theft
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| show | Forgery, bankruptcy, fraud in execution(not apply if should have known what was happening), minority, mental capacity/illegality/extreme duress(if state law make trans void), material alteration of instrument(partially real defense)
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| In a material alteration of instrument what is an HDC allowed to get when the dollar amount is altered? Non HDC? If an instrument was incomplete originally and completed w/o authorizatoin?Non HDC? | show 🗑
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| show | changes in amount/interest rate/days, additions to writing/removal part of instrument, completion of instrument without authorization
-Considered material even if small change such as a penny
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| show | all rights of a HDC, still NOT a HDC. called shelter provision
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| What are the exceptions to the shelter rule (Holder through a holder in due course)? | show 🗑
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| show | Federal Trade Commission Rule. Its federal, UCC is state
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| Why was the Federal Trade Commission Rule created (who is it aimed to protect)? | show 🗑
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| show | consumer signs installment sales contract containing waiver of defenses, consumer signs sales contract containing promissory note, retailer arranges financing with a separate party for consumer financing
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| show | Contractual liability and warranty liability. - explains who is responsible to pay the holder/holder in due course
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| What is a contractual liability? What are the types? | show 🗑
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| Under contractual liability, what and who is primary liability? Secondary? | show 🗑
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| show | presentment(payment demand) of instrument to primary party by holder/HDC, dishonor of instrument by primary party, timely notice of dishonor provided to endorsers(notice not required for drawer, banks have till midnight next day, others have 30 days)
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| show | 1.Yes by signing without recourse
2.No
3.drawer and all previous endorses are discharged from liability because bank accepted check and agreed to pay it
4.prior signatory parties not subsequent signers
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| show | 1.transfer and presentment warranties
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| Describe a transfer warranty. (what are the 5 transfer warranties) | show 🗑
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| If a transferor endorses the instrument, who does he make all five warranties to? If he doesnt endorse? | show 🗑
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| What is a presentment warranty? | show 🗑
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| What are the three presentment warranties for an unaccepted draft? For all other warranties | show 🗑
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| show | No not required
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| show | inured party can receive what they paid for the instrument (not face value as under contract liability)
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| Can authorized agents sign negotiable instruments on behalf of drawers/makers? Would an agent be personably liable? | show 🗑
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| show | 1.one who signs to lend his name to the other party
2.Yes liable on instrument in capacity he signed even if taker knows of his accommodation status, has right of recourse against accommodated party though if held liable
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| show | 1.all endorsers discharged from liability
2.prior party discharged from liability (must be written)
3.discharges prior parties to instrument from liability
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| show | 1.Only if later ratify it
2.Yes if signature of maker or drawer is forged holder can acquire good title(forgery is real defense so innocent maker/drawer cant be required to pay)
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| Can a forged endorsement transfer title? Are there exceptions to this? | show 🗑
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| show | applies when maker/drawer issues a note/drat to an imposter thinking he is the real payee/payees agent. When imposter forges real payees name the note/draft is negotiated. Innocent subsequent holder can collect from maker/drawer
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| What is the fictitious payee rule for a forged endorsement? | show 🗑
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| What is a trade acceptance? | show 🗑
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| What is a bankers acceptance? Sight draft? Time draft? Money order? | show 🗑
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| show | purchased from bank, drawer(traveler) must sign twice for identification (once when purchase, once when use)
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| show | 1.Check where drawer and drawee are same bank with separate party being the payee (still a three-party instrument)
2.draft drawn by one bank on another bank
3.check that payor bank agreed in advance to pay (bank primarily liable)
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| show | savings and loan associations, credit unions, trust companies
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| show | Drawer (customer of bank)
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| show | 1.any transaction or series of related transactions greater than $10,000 (ordinary checks are exempt)
2.suspected crimes involving $1,000 or more in funds
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| show | 1.if presented more than six months after it is due
2.liable to drawer for payment unless drawers negligence contributed(bank should know signatures of customers) or didnt notify bank within 30 days of bank statement
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| When are banks no longer obligated to pay a check? Who is liable for damages caused by wrongful dishonor of a check? What about a payment of bad checks? | show 🗑
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| show | depositor has 3 years to notify bank and bank may charge check bak to party that presented it (one cashing check gave warranty that all signatures are genuine)
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| show | 1. 14 days
2. 6 months
3. when drawer can prove banks failure caused drawers loss
4. drawer has no valid defense to justify dishonoring instrument
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| show | Bank may choose, no rhyme or reason
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| show | limit of $50 if notify bank within two days, $500 if after 2 days before 60 days unauthorized use appears, No limit if fail to 60 days too
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| Unauthorized use of electronic fund transfer is a felony Yes or no? Who does the electronic fund transfer act and regulation E apply to? How about fund transfer Act and Regulation E | show 🗑
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| show | When negotiated to a holder who takes it in good faith in the ordinary course of business without notice of a defense and pay value
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| What rights does a holder by due negotiation receive? | show 🗑
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| show | Original owner because document of title procured by thief confers no rights to the goods
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| show | document is genuine, he has no knowledge of any fact that would impair its validity/worth, his negotiation/transfer is rightful and fully effective w/respect to document of title and goods it represents
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| show | 1.regulates US money/oversees bank holding companies
2.insures customer deposits against bank failure
3.regulate/supervise national banks/federal branches of foreign banks
4.ensure open/efficient operation of futures market
5.deals with savings and lo
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