What is restrictive & non-restrictive idorsement

A restrictive indorsement is an indorsement that contains some sort of instruction from the indorser.

A nonrestrictive indorsement is an indorsement that has no instructions or conditions attached to the payment of funds.

What is blank & special indorsement

A blank indorsement is an indorsement that does not specify a particular indorsee. It creates bearer paper.

A special indorsement is an indorsement that contains the signature of the indorser and specifies the person (indorsee) to whom the indorser intends the instrument to be payable. It creates order paper.

How order and bearer paper can be converted ?

Instruments can be converted from order paper to bearer paper, and vice versa, many times until the instrument is paid. The deciding factor is the type of indorsement placed on the instrument at the time of each subsequent transfer. An indorsement is the signature (and other directions) written by or on behalf of the holder somewhere on the instrument.

How order and bearer paper are negotiated ?

Order paper is negotiated by indorsement and delivery.
Bearer paper is negotiated by delivery; indorsement is not necessary.

Explain parties to check

Drawer to the check—the customer who has the checking account and writes (draws) the check
Drawee of the check—the financial institution where the drawer has his or her account
Payee of the check—the party to whom the check is written

What do you mean by orders to pay and promises to pay ?

• Orders to pay are drafts or checks.
• A draft is a three party instrument that is an unconditional written order by one party that orders the second party to pay money to a third party.
• A check is a draft that is drawn on a financial institution and is payable on demand. Promises to pay are promissory notes and certificates of deposit.
• A promissory note is a two party instrument that is an unconditional written promise by one party to pay money to another party.
• A certificate of deposit is a special type of note where the maker is the financial institution that issues the certificate and the payee is the party to whom the certificate is made payable.

Difference between a negotiable and a nonnegotiable instrument

Negotiable instruments must meet certain requirements established by Article 3 of the Uniform Commercial Code. An instrument that does not meet these requirements is not a negotiable instrument and is subject to contract law.According to the UCC 3-104(a), a negotiable instrument must:

Be in writing
Be signed by the maker or drawer
Be an unconditional promise or order to pay
State a fixed amount of money
Not require any undertaking in addition to the payment of money
Be payable on demand or at a definite time
Be payable to order or bearer