Form and Content

Topics: Promissory note, Negotiable instrument, Cheque Pages: 3 (661 words) Published: December 3, 2013
Chapter 24--Form & Content
-Negotiable instruments (instruments): drafts, checks, promissory notes, and certificates of deposit. -Utilized in the sale of goods and services as well as financing businesses.

The use of negotiable instruments has increased to such an extent that payments made with these instruments, checks in particular, are now many times greater than payments made with cash, which now is used primarily for smaller transactions. The utilization of checks has decreased due to the emergence of electronic transfers, while promissory notes have been utilized to pay for a company’s operating expenses and current assets. Modern business could not be conducted without the use of negotiable instruments. Negotiability: a legal concept that makes instruments freely transferrable, a readily accepted form of payment in substitution for money. -Invests negotiable instruments with a high degree of marketability and commercial utility. -It allows negotiable instruments to be freely transferrable and enforceable by a person with the rights of a holder in due course against any person obligated on the instrument, subject only to a limited number of defenses. -Must satisfy 2 conditions: (1) meet the requirements of negotiability & (2) must be acquired by a holder in due course.

The flourishing of trade and commerce brought about the necessity to develop an effective way of exchanging contractual rights for money.

Ex.
A merchant who sold goods for cash might use the cash to buy more goods for resale. If he were to make a sale on credit in exchange for a promise to pay money, why should he not be permitted to sell that promise to someone else for cash with which to carry on his business?

One difficulty was that the buyer of the goods gave the seller only a promise to pay money to him. The seller was the only person to whom performance or payment was promised. If, however, the seller obtained from the buyer a promise in writing to pay...
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