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• Look for the answer in Friday’s Notes• What is a draft?• What is a note?

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AgendaAgenda• Warm up• Discuss Notes—Negotiable

Instruments• Review Textbook Chapter 23

– Reviewing what you learned—510– Critical Thinking -510– Reviewing what you learned -515– Critical Thinking-515

• Handout—Checking Account and EFT’s• Word Puzzle Negotiable Instruments

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Negotiable Negotiable InstrumentsInstruments

Unit B Business LawUnit B Business Law

Objective 6.01Objective 6.01

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DraftsDraftsDraft - An order by one person to another person to pay

money to the order of a third person

• Three parties to a draft:A. Drawer – Orders the money to be paidB. Drawee – One ordered to pay the moneyC. Payee – One who is to receive the money

• Acceptor - A drawee who has written “accepted” on the document and signed his/her name

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• Types of Drafts:

Sight Draft – A draft payable as soon as it is presented to drawee for payment

Time Draft – Not payable until the lapse of a particular time period stated on a draft

Trade Acceptance – Used by a seller of goods to receive payment or to extend credit

Check – Draft drawn on a bank and payable on demand, can be called a demand draft• Honor – Pay when due• Dishonor – Refuse to pay when due• Stop Payment – Instruction for bank not to pay check

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• Types of Checks

Certified Check – A personal check that has been accepted by a bank before payment

Cashier’s Check – A check the bank draws on itself

Money Order – Draft issued by a post office, bank, express company, or telegraph company for use in paying or transferring funds for the purchaser

Traveler’s Checks – Draft drawn by a well-known financial institution on itself or its agent, used when traveling

Teller’s Check – Draft drawn by a bank on funds that it has on deposit at another bank

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NotesNotes

• A written promise by one person to pay money to another person

• An advantage of using a note is that it can be transferred without much difficulty to other people

• Evidence of a debt

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• Types of Notes:

•Demand Note – Payable whenever the payee demands payment

•Time Note – Payable at a future date that is written on the face of the note

• Installment Note – Paid in a series of payments

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Parties to a DraftParties to a Draft

Charles Paige 319619 Main StreetRaleigh, NC 27601 2-131/1034

_________July 16_____2006PayTo the Order of _____Donnie Tatum_________________________$100.50_One hundred and 50/100 -------------------------------------DOLLARSState Credit Union

For _______________ _Charles Paige______

DrawersAddress

PayeeCheck Date

Drawer’s Signature

Bank Name

CheckNumber

ABA #

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Parties to a NoteParties to a Note

MakerPayee

InterestRate

$ 700.00 Raleigh, NC May 23, 2006

Three months AFTER DATE ______I_____ PROMISE TO PAY

TO THE ORDER OF ___________Charles Paige_________________

Two thousand five hundred and no/100 - - - - - - - - - - - - -DOLLARS

PAYABLE AT ___________his firm___________________________

VALUE RECEIVED WITH INTEREST AT ___10%___ PER ANNUM

No. 319 Due March 19, 2007 Claudette Love

Face Value\Principal

Time\Term

Due Date

Face Value\Principal

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Certificate of DepositCertificate of Deposit

A written acknowledgment of the receipt of money and its promise to pay back the money, usually with

interest on the due date.

Has a higher interest rate than most savings accounts.

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Negotiability RequirementsNegotiability Requirements

• Must abide by UCC regulations• Must be in writing• Maker (party agreeing to pay money to

another person) or drawer (party that orders the drawee to pay money to the payee) has to sign

• There must be a definite amount money and time of payment known

• Must have words such as “to the order of” or “to bearer”.

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Rules Regulating Checking Rules Regulating Checking AccountsAccounts

1. Stale Checka. Check that is more than 6 months oldb. Bank may refuse without liability

2. Avoiding Negligencea. Drawer is responsible if negligent in writing checkb. Write figures close to $ sign and draw line through

spaces not usedc. Write close to “Pay to Order of” and draw line

through spaces not usedd. Figures and written amount should agreee. Sign name lastf. Write “Void” on check if mistake is made and in

check register

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3. Bad Checksa. Check issued against checking account

with insufficient funds to cover itb. States have statutes making it a larceny c. Failure of drawer to make check good

within certain period of time will serve as a presumption of guilt

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4. Forged Checka. Check signed by someone other than

drawer and without authorityb. If bank pays and drawer not negligent,

bank bears lossc. Drawer has 1 year to discover and report

to bank unauthorized signature or alteration on face of check

d. Drawer has 3 years to discover and report to bank any unauthorized endorsement on check

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5. Stop Paymenta. Bank has no right to cash checkb. Bank liable if check is cashedc. Oral stop payment good for 14 daysd. Written stop payment effective for 6

monthse. Holder in due coursef. Upon death, bank can cash checks for 10

days for those written prior to death

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6. Balancing Checkbooka. Should be done as soon as possible after

receiving statementb. Balance after writing checksc. Subtract checks written from balanced. Add deposits to balance

7. Outstanding Checka. Has not cleared the bankb. Must be known in order to reconcile

statementc. Find by comparing the bank statement

with the checkbook register

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8. Reconciling a Checkbooka. Makes sure the bank’s records agree with

your recordsb. Check for outstanding checks and depositsc. Check the checks, deposits, ATM activity

on the bank statement to make sure that your records are correct

d. Make adjustments to the bank statement and your records to ensure that you and the bank have the same amount of money

e. Reconcile every statement when received

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Competitive Banking ActCompetitive Banking ActFunds from the following must be available on day after

deposit– Checks drawn on US Treasury, State, or Local

Government– Bank Drafts– Cashier’s Check– Postal Money Order

Funds from these must be available within 3 business days following deposit– Checks drawn on banks within same district

Funds from checks drawn on banks in different districts must be available within 7 days

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Electronic Funds TransferElectronic Funds TransferEFT – Banking method in which

computers and electronic technology are used as a substitute for checks and other paper forms of banking

Electronic Funds Transfer Act Provides– Automated Teller Machines (ATM’S)– Pay-By-Phone Systems– Direct Deposit or Withdrawals– Point-of-Sale Transfers– Automatic Deposits and Payments

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Federal Laws Regulating Federal Laws Regulating EFTEFT

• No right to stop payment• Must receive a receipt each time you use ATM• Periodic statement must be issued• 60 days from date a problem or error appears to

notify bank• Banks have 10 days to investigate• Disputed funds, if returned, must be deposited to

your account within 45 days• Must notify bank it card is lost or stolen

– Will lose no more than $50 if reported in 2 days– If more than 2 days notification, you can lose

$500 or more