Page 76 - Bus101FlipBook

5-18 Law, Business & Government [CH 5

certificates of deposit, checks, promissory notes, and share drafts.
Article 3 of the UCC specifies that a negotiable instrument must meet the following
requirements:

1. It must be written and signed by the maker or drawer.
2. Be payable to a specific person, business or to bearer (the individual in possession
of the instrument).
3. Contain an unconditional promise or order to pay a certain sum in money.
4. Be payable on demand or on a specified date.

Endorsing a negotiable instrument

The payee (the one to whom the instrument is written to) must endorse (sign) a
endorsement negotiable instrument before it can be transferred. The endorsement is a release of claim.
Procedure of signing a Checks and other forms of commercial paper are transferred when the payee endorses the
negotiable instrument that back of the instrument. Article 3 of the UCC describes four kinds of endorsements as
renders it transferable.
When you cash a check at shown in Illustration 5.4 and include the following:
the bank you endorse the 1. Blank endorsement is accomplished when the payee signs the back of the
check to negotiate it for its instrument. This type of endorsement allows the document to be transferred any
face value.
number of times between parties who are willing to accept it for value. Because this
type of endorsement causes the instrument to become a payable to bearer on
demand document it could become unsafe because anyone then holding the
instrument can re-negotiate it. A blank endorsement should not be used if the
instrument is to be mailed.

2. Restrictive endorsement states what the instrument is for and is thus much safer.
Using the words for deposit only along with the signature constitutes a restrictive
endorsement. Restrictive endorsement protects the negotiable instrument should it

be lost or stolen.
3. Special endorsement specifies the person to whom the instrument is payable by

including the person’s or firm’s name. With this kind of endorsement, only the
person whose name appears after “Pay to the order of . . .” can further the
negotiability of the instrument.

4. Qualified endorsement—uses the words without recourse. This means that the
person who originally signed the instrument and not the endorser is responsible for
payment. This limits the endorser's liability in the event that the instrument is not
backed by the sufficient funds.
agency
Legal relationship between The Law of Agency
two parties, principal and
agent, who agree that one Agency deals with representation and describes a legal relationship between a principal
will act as a representative and his representative, an agent. The agency is that the agent “agrees to act as a
of the other. representative of and for the benefit of the principal.” The principal is the person who
wishes to accomplish something, and the agent is the one employed to act on the principal's
principal behalf to achieve it.
Person who is represented
by an agent. The legal concept of agency is closely associated with business and business
transactions; though an agency relationship can be as simple as one family member acting
agent for another. In real estate transactions, it is common for the buyer and seller to have an
Person employed to act on agent that represents them in the sale and transference of real property.
behalf of another individual. Under agency law the principal is responsible for the actions of his agent and is bound

by those actions. The legal basis for holding the principal liable for acts of his agent is the
Latin maxim of respondent superior (“let the master answer”). In cases involving agency
law, the courts discern the rights and obligations of the various parties. Where an agency
relationship exists, the principal will be held responsible (liable) for the acts of the agent.
Now do not think that the agent in their action is wholly not responsible, they are not. The
agent is also personally liable for their acts even when acting on the wishes or direction of

the principal. The agent in such cases is liable to the principal for any damages caused by
the agent, and his actions are deemed caused by the principal.

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