Last week, we took a brief look at Article 2 of the UCC during our study of Contract Law. This week, we will stay with the UCC and look at Articles 3 & 4 regulating Negotiable Instruments and Article 9 regulating Secured Transactions. “A negotiable instrument is a signed writing (or record) that contains an unconditional promise or order to pay an exact amount of money, either on demand or at a specific future time” (Clarkson, Miller, & Cross, 2015, p. 476). There are two primary types of negotiable instruments, order instruments and promissory instruments. A check is a common example of an order instrument as the drawer (the person writing the check) orders the drawee (their bank) to pay the Payee (the person to whom the check is made out) a certain sum of money. A promissory note filled out for a student loan would be an example of a promise to pay as the maker (or borrower) promises to pay the lender (Sallie Mae, for example) a certain amount of money on a set day each month. The specific elements for an instrument to be negotiable will be reviewed in Chapter 25. Chapter 26 reviews how to transfer a negotiable instrument and what rights a holder of a negotiable instrument has in the instrument. A holder of the instrument may create a Holder in Due Course (HDC), who has more rights to enforce the instrument than the original holder if the HDC takes the instrument for value, in good faith, and with no notice that there are any defenses to the enforcement of the instrument. Chapter 27 reviews the defenses that may be used by a holder and a HDC against enforcement of the instrument. Our written response will help us explore issues faced by the banking industry in regards to check fraud. This assignment will look at who the primary victims of check fraud are and what can be done to prevent check fraud. Chapter 30 deals with Secured Transactions and what a creditor can do to protect their interest in collateral and to ensure they have priority rights in the collateral should the debtor default. There are two steps that a creditor should take to protect their interest in collateral and they are: Attachment (or the execution of a security agreement with the debtor) and Perfection (most commonly achieved by filing a financing statement with the Secretary of State). Our second discussion forum posting will examine issues that arise when filing financing statements. Chapter 31 reviews Bankruptcy Law and the types of Bankruptcy relief available to debtors. FORUM 3-1: Faith Integration Exodus 22:25-27 lays out strict behaviors for how a creditor should treat a debtor: “If you lend money to one of my people among you who is needy, do not treat it like a business deal; charge no interest. If you take your neighbor’s cloak as a pledge, return it by sunset, because that cloak is the only covering your neighbor has. What else can they sleep in? When they cry out to me, I will hear, for I am compassionate.” What additional requirements does this place on a Christian businessperson or creditor? Can these requirements be harmonized with the protections for creditors discussed in our reading and Article 9 of the UCC? What is Article 9 of the UCC? Article 9 is a section under the UCC governing secured transactions including the creation and enforcement of debts. Article 9 spells out the procedure for settling debts, including various types of collateralized loans and bonds.
