Question

LAW OF BUSINESS

1. Describe the essence of the requirements that must be present for an instrument to become negotiable without the need to investigate its validity through reference to circumstances of the instrument’s creation or to other documents.   What does it mean to ‘endorse’ a negotiable instrument and what legal effect does this have?

2. Identify the document registered as evidence of a security interest in personal property. Explain the registration process and requirements that apply to it.  Explain the distinction between being a secured creditor and an unsecured creditor for the purposes of bankruptcy.

Answer 1

essence of the requirements that must be present for an instrument to become negotiable

1. Must be in writing. · The writing can be on anything that is readily transferable and that has a degree of permanence

2. Must be signed by the maker or drawer. · The signature can be anyplace on the instrument. · It can be in any form (such as word, mark or rubber stamp) that purports to be a signature and authenticates the writing. · It can be signed in a representative capacity.

3. Must be a definite order or promise to pay. · A promise must be more than a mere acknowledgement of a debt. · The words “I/We Promise” or “Pay” meet this criterion.

4. Must be unconditional. · Payment cannot be expressly conditional upon the occurrence of an event. · Payment cannot be made subject to or governed by another agreement. · Payment cannot be paid out of a particular fund (except for a government issued instrument)

5. Must be an order or promise to pay a sum certain. · An instrument may state a sum certain even if payable in instalments, with interest, at a stated discount or at an exchange rate. · Inclusion of cost of collection and attorney’s fees does not disqualify the statement of a sum certain.

6. Must be payable in money. · Any medium of exchange recognized as the currency of a government is money. · The maker or drawer cannot retain the option to pay the instrument in money or something else.

7. Must be payable on demand or at a definite time. · Any instrument payable on sight, presentation or issue is a demand instrument. · An instrument is payable at a definite time even though it is payable on a stated date, or within a fixed period after sight, or the drawer or maker has an option to extend time for a definite period. · Acceleration clauses, even if unenforceable, do not affect the negotiability of the instrument.

8. Must be payable to order or bearer. · An order instrument must name the payee with reasonable certainty. · An instrument whose terms intend payment to no particular person is payable to bearer.

distinction between being a secured creditor and an unsecured creditor for the purposes of bankruptcy.

· Secured creditors:secured creditors are those that have a lien against something, an asset or piece of property.

· Unsecured creditors:Unsecured creditors are those who loan money to individuals without the ability to grab property if the loan isn’t repaid. These creditors give money based purely on your promise to repayUnder-secured creditors

When you file for bankruptcy protection, the secured creditors will always receive payment first. This rule is written into the bankruptcy laws, placing the secured creditors’ interest above that of the unsecured creditors

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1. What does it mean to ‘endorse’ a negotiable instrument and what legal effect does this have?

2. Identify the document registered as evidence of a security interest in personal property.