Excuse Me, Is Your Paper Negotiable?

Warning: Stop reading now if boring law topics make you catatonic.

I have finished the first week of my last year of law school and I am determined to stay current with my reading. (Something I haven't been able to do during the previous years.)

Today I am studying negotiable instruments. Apparently, this is just stuff about checks, and CDs and cashier checks, etc., but of course there are technical terms and rules and stuff about it.

Like most things, this law has it roots in the Middle Ages. According to my textbook, drafts--or bills of exchange--originated in Europe in the Middle Ages, when merchants were wanting to travel from point A to point B and they were faced with the possibility of being robbed enroute.
They solved this by going to a bank in their city of origin and getting a letter addressed to another bank in their destination city, telling it to give a certain amount of money to that merchant on arrival. Sounds kind of like the situation today, and why people get travelers' checks and all.

My textbook goes on to say that there is not enough money to go around, so these negotiable instruments help out with that. hmmmmmmm.

Some factoids from my reading:

--A note is a written promise to pay money. If the note is written by a bank, it is a CD.

--A draft is a written order by one person (drawer) to another (drawee) directing the latter to pay money to a third person (payee). So if you deposit money in your checking account and then write checks addressed to the bank ordering it to pay the comic book vendor for all those comic books you bought, you are the drawer, the bank is the drawee, and the guy who had the comic books is the payee.

--A draft written on a bank and payable on demand is a check. If the bank is both the drawer and the drawee, then what you have is a cashier's check. If one bank draws a draft on another or makes the draft payable through another bank, the instrument is a teller's check.

Bored yet? No??? My goodness, you are a glutton for punishment!

--When the word negotiable is used with paper, it means the form, and negotiated means transfer process. A purchaser is the holder in due course???? Book doesn't explain this very well. Get more info on this.

--Every element specified in Article 3-104a of the UCC must be met or the instrument is non-negotiable. (Get these requirements.)

--Apparently the first question a lawyer should ask in this regard is, "Is the instrument technically negotiable?"

--This is important, as negotiable instruments pass more freely in commerce than do non-negotiable ones. The transferee of negotiable paper, if a holder in due course, has the protection of the rule, and then all other parties to the paper will have to pay it at maturity even if they have defenses. If the paper is non-negotiable, then it is nothing more than an assignment of a contract right, and holders or assignees of a contract take subject to all defenses arising from the underlying transaction.

All for now. Go write some checks! Spread the wealth around!