University:
Indiana University Bloomington
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

198

Pages:

2
Author:

bratrochanter

Summary of Appendix B B-49 to B-52: Negotiable Instruments (Key Provisions) Unconditional Promises and Payability 1. Unconditional Promise or Order (§3-106): o A promise or order is unconditional unless it:  Has an express condition for payment.  Is governed by another document.  Refers to rights or obligations in another document (mere reference is insufficient). o Countersignature requirements (e.g., traveler’s checks) do not make the instrument conditional. 2. Foreign Money (§3-107): o Instruments payable in foreign money can be paid in the stated foreign currency or its equivalent in U.S. dollars, calculated using the current exchange rate on the payment date. 3. Payment Timing (§3-108): o Instruments are:  Payable on demand if they state "on demand" or lack a specific payment date.  Payable at a definite time if a fixed or ascertainable date is specified. 4. Payee Identification (§3-109, §3-110): o Instruments are:  Payable to bearer if no specific payee is named or they state “payable to cash.”  Payable to order if they specify an identified person or their order. o Ambiguities about joint payees (e.g., "and" or "or") determine whether all or any payee can enforce payment. Negotiation and Transfer 5. Negotiation (§3-201): o Defined as the transfer of possession of an instrument, enabling the recipient to become the holder. o Requires indorsement (signature on the instrument) if payable to a specific person. 6. Transfer of Rights (§3-203): o Transfer vests the transferee with the transferor's rights, including enforcement rights. Fraud or illegality may prevent transferee from becoming a holder in due course. 7. Indorsement (§3-204): o A signature on the instrument by someone other than the maker, drawer, or acceptor to:  Negotiate it.  Restrict payment.  Accept liability. o Can be special (to a specific person) or blank (becoming payable to bearer). o Other Key Provisions 8. Statute of Limitations (§3-118): o Time limits for enforcement include:  Six years for most notes and acceptances.  Three years for actions on unaccepted drafts and warranties.  Ten years in some cases where no payments are made or no demand is issued. 9. Contradictory Terms (§3-114): o Handwritten terms override typewritten or printed terms. o Words take precedence over numbers. 10.Incomplete Instruments (§3-115): o An incomplete instrument (e.g., missing amount or date) can be enforced as completed if it meets negotiability requirements. o Unauthorized completions are treated as alterations.