Apr 06, 2013 12:58 AM

The NEGOTIABLE INSTRUMENT-thread.....

Barron's Law Dictionary 3rd-edition 1991- NEGOTIABLE INSTRUMENT: a writing which is SIGNED by the maker or drawer, contains an unconditional promise or order to pay a sum certain in money, is payable on demand at a definite time, and is payable to order or to BEARER. A draft, check, CERTIFICATE of deposit, and NOTE may or may not be a negotiable instrument depending upon whether the above elements of negotiability are satisfied. A TRANSFEREE of a negotiable instrument may have rights superior to to the ASSIGNEE of other obligations if the transferee qualifies as a holder in due course.

BEARER: the person in possession of an instrument, document of title, or security payable to bearer or endorsed in blank. A note payable to bearer is payable to any person who successively holds the note BONA FIDE, not by virtue of any assignment of promise, but by an original and direct promise moving from the maker to the bearer.

BONA FIDE (latin): in good faith; without fraud or deceit.

CERTIFICATE OF DEPOSIT: an acknowledgment by a bank of receipt of money with an engagement to repay it. The writing may or may not be a negotiable instrument depending on whether it meets the requirements for negotiability.

NOTE: a writing acknowledging a debt and promising payment. For the instrument to be negotiable it must be signed by the maker and contain an unconditional promise to pay a sum certain in money on demand or at a definite time to order or to bearer. A note is not payment but only a promise to pay. The term note is synonomous with the term promissory note. The term may be qualified by its unique characteristics. For example, a note that is backed by a pledge of collateral such as real or personal property is called a SECURED NOTE; when no such collateral is behind the promise it is called an UNSECURED NOTE. If the note is payable at any time it is called a DEMAND NOTE. If the note is payable over a specified period of time in more than one payment, it is called an INSTALLMENT NOTE. If the note evidences a loan for which real estate has been encumbered it is called a MORTGAGE NOTE. If the note is negotiable it is called a NEGOTIABLE NOTE. These various terms can also be combined so that a note that is payable at any time, secured by collateral may be called a "negotiable secured promissory demand note," and so forth. See also treasury note.

TREASURY NOTE: an intermediate term (one-to-five years) obligation of the (U.S.) government that bears interest paid by COUPON. Like all direct (U.S.) government obligations, Treasury notes carry the highest domestic credit standing and, thus, have the lowest taxable yield available at equivalent maturity.

COUPONS: certificates, usually attached to an instrument evidencing a loan, which may be detached (clipped) and presented separately for payment of a specific sum of money representing interest on the main instrument. See bond [Bearer Bonds] Bonds are available in two forms.

BEARER BONDS: are negotiable instruments that must be SAFEGUARDED (think Registrar GENERAL) by the owner to prevent loss. Interest is paid by COUPON redemptions.

REGISTERED (think REGISTRAR General) BONDS: are recorded on the books of the issuer by the TRUSTEE, and interest is paid BY MAIL to the HOLDER of record. See security [Bond]; treasury bond.

HOLDER OF RECORD (Black's 8th-edition): See STOCKHOLDER OF RECORD.

STOCKHOLDER OF RECORD: the person who is listed in the issuer's books as the owner of stock on the RECORD DATE.

RECORD OWNER: 1. a property owner in whose name the title appears in the public records. 2. Stockholder of Record.

DATE OF ISSUE: 1. Commercial law. an arbitrary date (for notes, bonds, and other documents in a series) fixed as the beginning of the term for which they run; the date that a stock or bond bears on its face, not the date on which it is actually signed, delivered, or put into circulation. When a bond is delivered to a purchaser, it is considered ISSUED. But this concept is distinguishable from the "date of issue," which remains fixed, regardless of the date of sale or delivery. 2. Insurance. The date specified in the policy as the "date of issue," not the date on which the policy is executed or delivered, and regardless of other dates that may be specified in the policy or elsewhere, such as the date that the policy is to "take effect."

RECORD DATE: Corporations. The date on which a stockholder must own shares to be entitled to vote or receive a DIVIDEND. See Ex-Dividend Date.

EX-DIVIDEND (Barron's): without a RIGHT to a declared dividend. When a stock trades ex-dividend the buyer does not receive the declared dividend because the date on which he will officially own the stock will occur after the record date of ownership for purposes of receiving same. A stock will trade ex-dividend during the settlement period, usually five business days, between the execution of an order to buy or sell the SECURITY by a broker and the date of settlement when the CERTIFICATE and funds change hands. The Payment Date refers to when the dividend is actually paid and is usually sometime after the ex-dividend date (sometimes called simply EX-DATE) and the record date.

BOND: Security. written instrument with SURETIES, guaranteeing faithful performance of acts or duties contemplated; evidence of a debt; a binding agreement, a COVENANT between two or more persons, or an instrument under SEAL by which the maker binds himself, and usually also his heirs, executors and administrators or, if a corporation, their successors, to do or not to do a specified act. A bond may thus be the obligation of a state, its subdivision, or a private corporation, represented by certificate for principal, and by detachable coupons for current interest; includes all interest-bearing obligations of persons, firms, and corporations. The rights of the HOLDER are specified in the bond INDENTURE, which contains the legal terms and conditions under which the bond was issued. Bond debt is secured or guaranteed primarily by the ability of the issuer (borrower) to pay the interest when due and to repay the principal at maturity. See Certificate of Indebtedness or Security.

CERTIFICATE OF INDEBTEDNESS (Black's 8th): 1. Debenture 2. Treasury Bill 3. Certificate of Deposit

DEBENTURE (Barron's): a written acknowledgment of a debt with a promise to pay; financial obligation of corporations often bought and sold as investments. Compare Certificate of Deposit; Note. Holders of debentures representing corporate indebtedness, as CREDITORS of the corporation, are ENTITLED to payment before stockholders [the owners of the corporation] upon dissolution of the corporation. To protect debenture holders who rank as general creditors, the debentures might limit borrowing, impose a current liabilities-assets-margin requirement, restrict dividend payments, limit share redemption or purchase, require the maintenance of certain reserves, or restrict additional issues of securities. See Indenture.

INDENTURE: a DEED between two parties conveying real estate by which both parties assume obligations. "Indenture" implies a SEALED instrument. Historically, Indenture referred to a crease or wavy cut that was made in duplicates of the deed so their authenticity could be verified later. In a business context, an indenture is a lengthy written agreement which sets forth the terms under which bonds or debentures may be issued. Terms include the amount of the issue, the interest rate, the maturity, the property pledged as collateral (if any), and the so-called "protective covenants." An independent trustee, usually a BANK (BANK OF CANADA?) or trust company, is named to oversee the issuance of the bonds, to COLLECT and PAY interest and principal, and to protect the bondholder's RIGHTS as specified in the indenture.

DEED OF TRUST: a TRANSFER of LEGAL TITLE to property from the TRUSTOR [SETTLOR] to the trustee (now US), for the purpose of placing the legal title with the trustee as SECURITY for the performance of certain obligations, monetary or otherwise.

TRUSTOR: one who creates a trust; more often called the settlor.

SETTLOR [DONOR; TRUSTOR]: one who creates a trust by giving real or personal property "in trust" to another (the trustee) for the benefit of a third person (the beneficiary). One who gives such money is said to "settle" it on, or bring title to rest with, the trustee, and is also called the "donor" or "trustor."

DONOR: one who gives or makes a GIFT; creator of a trust; the party conferring a power e.g. the grantor of a power of appointment.

GIFT: a voluntary transfer of property made without consideration, that is, for which no value is received in return. The essential components of a valid completed gift of personal property are: competency of the donor to understand the nature of his act; voluntary intent on the part of the donor to make a gift (called DONATIVE INTENT); DELIVERY either actual or symbolic; ACCEPTANCE, actual or imputed; complete divestment of all control by the donor; and a lack of consideration for the gift. A transfer that constitutes a gift may be of significance in several TAX contexts. For example, RECEIPT of a gift is excluded from the GROSS INCOME of the recipient, but the transferor may be subject to the unified estate and gift tax.

DONATIVE INTENT (Black's 8th): the intent to surrender DOMINION and control over the GIFT that is being made.

DOMINION: having BOTH title to AND possession of property; having CONTROL of both ownership and use.

POWER OF APPOINTMENT (Black's 8th): a power created or reserved by a person having property subject to DISPOSITION, enabling the donee of the power to designate transferees of the property or shares in which it will be received; especially a power conferred on a donee by will or DEED to select and determine one or more recipients of the donor's estate or income. If the power is exercisable before the donee's death, it is exercisable WHOLLY in favour of the donee. If the power is testamentary, it is exercisable wholly in favour of the donee's estate.

GENERAL POWER OF APPOINTMENT: a power of appointment by which the donee can appoint - that is, DISPOSE of the donor's property - in favour of ANYONE at all, including oneself or one's own estate; especially a power that authorizes the ALIENATION of a fee to any ALIENEE. Often shortened to general power.