The Legal Information Institute (LII) at Cornell University provides summaries o

Question

The Legal Information Institute (LII) at Cornell University provides summaries of legal topics, including those related to the Uniform Commercial Code (UCC). Along with your textbook chapter, read the following article, which provides an overview of negotiable instruments, and then answer the following questions:

1.How does the UCC define a negotiable instrument? What are the two categories of negotiable instruments? Into which category do checks fall?

2.Which types of payment mechanisms or transactions are NOT considered to be negotiable instruments? Is money considered an instrument?

3.What is the “rule of derivative title” (look it up in a legal dictionary!)? Does this rule apply to negotiable instruments? Explain.

Explanation / Answer

1.The UCC defines a negotiable instrument as an unconditioned writing that orders the payment of a mixed amount of money.The two categories of negotiable instruments are

Draft is an instrument that orders a payment to be made.

Note is an instrument that orders a payment will be made.

Checks fall into the category of drafts.

2.Rules that doesn't meet the requirements stated in article 3 of the uniform commercial code are not considered to be negotiable instruments.Money is not considered as an instrument.

3.Derivative title is a title that is acquired from another person and a person gets such a title when an already existing right is transferred to a new owner..The derivative title will also refer to the general principle that a transferee of property acquires only the rights held by the transferor and not more than that.If an instrument is negotiable this rule is suspended.

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