Tradable legal documents {commercial paper}| include checks, promissory notes, bank drafts, deposit certificates, and most corporate bonds. Commercial paper can be non-transferable {non-negotiable}. In this case, debtor owes money to party. Commercial paper can be transferable {negotiable}. Debtor pays parties to whom paper transfers. Transfer can be by endorsement, the same as checks. Transfer can be by writing "pay to the bearer", as for corporate bonds. Transfer can be by delivery.
Legal negotiable-paper possessors {holder in due course} are not accountable for previous instrument-holder actions and have legal title to paper value. Finance companies that buy negotiable paper from merchants can get the money from consumers, even if merchants used deceit or other wrongful actions in original sales. Protection against negotiable paper is to have a restrictive clause in credit agreements to prevent commercial-paper transfer.
Commercial paper {negotiable instrument}| can be transferable. To be negotiable, maker or drawer must sign commercial paper, which must have an unconditional promise to pay, be payable at a certain time or on bearer demand, and be payable to bearer or to order. Negotiable commercial paper is stocks, bonds, over-the-counter stocks, stock exchange transactions, and bank and finance company transfers. If it has conditions, it is a contract.
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Date Modified: 2022.0225