© 2011 South-Western | Cengage Learning GOALS LESSON 6.1 COMMERCIAL PAPER List the various types of...

© 2011 South-Western | Cengage Learning

GOALS

LESSON 6.1

COMMERCIAL PAPER

List the various types of commercial paper, and describe the use and proper negotiation of each type

Explain electronic fund transfers (EFTs)


BUSINESS LAW, 2e LESSON

SLIDE 2

6.1

Commercial Paper

Commercial paper is defined as an unconditional written promise or order to pay a sum of money.

Unconditional, as used to define commercial paper, means that the legal effectiveness of the order or promise does not depend on any other event.



SLIDE 3

6.1

Major Types ofCommercial Paper

Orders to payDraftCheck

Promised to payPromissory noteCertificate of deposit



SLIDE 4

6.1

Specialized Types of Commercial Paper

Certified checkCashier’s checkTeller’s checkMoney orderTraveler’s checkTrade acceptance



SLIDE 5

6.1

Decreasing the Risk of Taking Commercial Paper

For people or businesses to accept commercial paper instead of cash, they must be assured that there is a very good chance the instrument will be paid.

Today, the Uniform Commercial Code (UCC), a set of state laws that governs business activities, provides that assurance.



SLIDE 6

6.1

Proper Transfer ofCommercial Paper

Order paper requires an indorsement.Bearer paper may be negotiated by

delivery alone.



SLIDE 7

6.1

Types of Indorsement

Blank indorsementSpecial indorsementQualified indorsementRestrictive indorsement



SLIDE 8

6.1

Accommodation Parties

An accommodation party is a cosigner.The maker is still primarily liable.



SLIDE 9

6.1

Collection and Discharge of Commercial Paper

Holder of commercial paperHolder in due course (HDC)Holder through a holder in due course

(HHDC)



SLIDE 10

6.1

Collecting on Commercial Paper

Limited defensesUniversal defenses



SLIDE 11

6.1

Discharge of Commercial Paper

PaymentCancellationNovationBankruptcy



SLIDE 12

6.1

Electronic Fund Transfers

A transfer of funds that requires a financial institution to debit or credit an account and that is initiated by the use of an electronic terminal, computer, telephone, or magnetic tape is an electronic funds transfer (EFT).

EFTs are conducted without paper instruments such as checks or drafts.



SLIDE 13

6.1

Examples of Devices that Facilitate EFTs

ATMsPoint-of-sale terminals in storesPay-by-phone systemsAutomated clearinghouse networks that

credit payroll checks directly to employees’ accounts



SLIDE 14

6.1

Electronic Fund Transfers Act (EFTA)

Emphasizes that the use of EFTs is purely voluntary

Requires consumer to receive a written receipt and statements

Provides rules for reporting and investigating errors

Limits liability for unauthorized transfers


GOALS

LESSON 6.2

SECURED TRANSACTIONS

Explain why secured transactions are necessary

Describe how a security interest is created and enforced



SLIDE 16

6.2

Creation of a Security Interest

There must be an agreement between the debtor and creditor that a creditor will have a security interest.

Creditor must give value.Debtor must retain rights.



SLIDE 17

6.2

Types of Secured Transactions

PledgeIn a pledge, the creditor is given possession

of the collateral.

Security agreementIn a security agreement, the debtor retains

possession of the collateral.



SLIDE 18

6.2

Perfection of a Security Interest

A perfected or fully enforceable security interest results when the creditor gives proper notice of its existence to all other potential creditors. A creditor in possession of the collateral, as in a

pledge, needs to take no additional steps for protection.

When the debtor has possession of the goods, it may be necessary for the creditor to file a financing statement at the appropriate governmental office to perfect the creditor’s interest.



SLIDE 19

6.2

Perfection in Tangible and Intangible Property

Tangible PropertyConsumer goodsFarm productsInventoryEquipment

Intangible Property



SLIDE 20

6.2

Termination of a Secured Transaction

When the debtor pays the debt in fullCreditor releases security interest in collateralTermination statement

When the debtor defaults Creditor takes or retains possession of collateralCreditor responsibilitiesDebtor’s rights


GOALS

LESSON 6.3

DEBTOR-CREDITOR RIGHTS

Discuss the laws protecting creditors and debtors

List the types of bankruptcy and explain the bankruptcy procedure



SLIDE 22

6.3

Laws Protecting Creditors

Involuntary liensMechanic’s lienArtisan’s lien

Third partiesSuretyshipSurety

Garnishment of wages



SLIDE 23

6.3

Laws Protecting Debtors

Maximum interest ratesClear and complete advance disclosure

of loan termsTerms of unconscionable contractsSpecific abuses in the credit systemNotice of debt paymentCancellation of debts



SLIDE 24

6.3

Bankruptcy Law

The U.S. Congress has exclusive power to establish uniform laws on bankruptcies.

Bankruptcy law has two purposes. It protects debtors by giving them a new

economic start free from most creditors’ claims.

It also protects creditors by setting up a framework to provide for the fair distribution of the debtor’s assets.



SLIDE 25

6.3

Types of Bankruptcy

Chapter 7 LiquidationChapter 11 ReorganizationChapter 13 Extended-Time Payment Plan Chapter 12 Plan



SLIDE 26

6.3

Voluntary or Involuntary Bankruptcy

Bankruptcy procedureNondischargeable debtsExempt propertyLiquidation and distribution of proceeds

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© 2011 South-Western | Cengage Learning GOALS LESSON 6.1 COMMERCIAL PAPER List the various types of...

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