Chapter 25 The Function and Creation of Negotiable Instruments

Chapter 25 The Function and Creation of Negotiable Instruments (流动票据)
I. Overview
A negotiable instrument (also known as commercial paper) is a signed writing (or electronic record) that contains an unconditional promise (无条件承诺) or order to pay an exact amount, either on demand or at a specific future time.
A negotiable instrument can function as a Substitute for cash or as an extension of credit.
Check: Substitute for cash
Promissory note (本票): Substitute for an extension of credit
For a negotiable instrument to operate practically as either a substitute for cash or a credit device, or both, it is essential that the instrument be easily transferable without danger of being uncollectible.
UCC governs
Commercial paper -- UCC Article 3
Bank deposits and collections – Article 4
Warehouse Receipts and Bills of Lading – Article 7
Investments – Article 8
II. Types of Negotiable Instruments
Basis Types of Negotiable Instruments
Instruments
Characteristics
Parties
Orders to pay

Draft (汇票)
An order by one person to another person or to bearer (持票人)
Drawer (开票人) – the person who signs or makes the order to pay

Drawee (付款人) – the person to whom the order to pay is made

Payee (收款人) – the person to whom payment is ordered
Check
A draft drawn on a bank and payable on demand.
(With certain types of checks, such as cashier’s checks, the bank is both the drawer and the drawee)

Promises to pay

Promissory note (本票，期票)
A promise by one party to pay money to another party or to bearer
Maker (出票人) – the person who promises to pay

Payee – the person to whom the promise is made
Certificate of deposit (存款单)
A note made by a bank acknowledging a deposit of funds made payable to the holder or the note.

Negotiable instruments may also be classified as either demand instruments or time instruments:
A demand instrument is payable on demand – that is, it is payable immediately after it is issued and thereafter for a reasonable period of time.
A time instrument
III. Requirements for Negotiability
IV. Factors That Do Not Affect Negotiability