bus 415 unit 4 responses

** There are 2 responses to read. After reading, write a 100 word response per response.

RESPONSE 1:

The negotiable instrument is a written paper document (commercial paper) that is signed, and the writing is the unconditional promise to pay a specific amount of money. The document can be presented in different forms, and each has different procedures. The first instrument is a draft and check that involves three parties: the creator who is called the drawer, the bank, who is the drawee and the payee who is the recipient of the money. The other negotiable instrument is a Promissory Note and Certificates of Deposit. The promissory note involves two parties which are the Promisor and the Promisee.

The requirements for an instrument to be negotiable begins with the signature of the maker or drawer of the instrument. The promise or order to pay is an unconditional amount of money that is fixed. The promise is due either on demand or at a definite time, meaning that if it is payable on sight or when it is presented to the drawee and within a definite period of time and date. An acceleration clause is effective which allows the payee to demand full payment if a certain event occurs. Also, there is an extension clause that allows for an extension after the stated expiration date.

Although we have the requirements, there are other factors that may come about that do not affect the negotiability of an instrument. Failing to include a date and postdating the document. If the instrument specifies interest but doesn’t clarify the interest rate, it then becomes the judgment rate of interest if the instrument is negotiable even when it has nonnegotiable stamped on it.

RESPONSE 2:

A holder to my understanding is a person who is in possession of an instrument, which is endorsed and can receive payment, therefore assuming the role of the payee. A holder in due course (HDC) as defined in our text is when a holder takes for value, takes in good faith, and without notice of defense to payment (Miller, 2016). A simplified understanding of the term according to USLegal.com, one possessing a check or promissory note that was given in return for something of value, who has no knowledge of any defects or contradictory claims to its payment. Nothing can transpire if there is nothing of value to exchange. What I understand from this is that the HDC is in possession of a check that has been given to them upon the negotiation of an item or items in return based on a specific amount agreed upon at the time of the transaction. The instrument was taken based on good faith and for its value. There is an assumption that this is an honest transaction on both parties’ behalf. The assumption goes a long way because to assume honesty means that there is an understanding that acceptance means that no other knowledge other than the good faith analysis is applied regarding the instrument. To have an HDC status means to have exchanged the instrument (lien) with a promissory note, check or credit can be used to give value. The HDC must receive the instrument without notice not being aware of any issues that go along with the instrument. Then we have the shelter rule where a person acquires the HDC status through an HDC and still have rights (Miller, 2016).

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