[NYCaccountant]

Does anyone have an easy way to remember primary and secondary liabilty circumstances for commercial paper? Just really difficult for me when you have 15 transfers of the instrument.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[teeteenounouche]

I'll take stab at answering your question but I couldn't find any easy way to remember it all:

the maker has primary resp on a note

the drawer (bank) has secondary resp on a draft and anyone who signs the instrument (unless written “without recourse”)

Are you referring to negotiability when you say 15 transfers? This can get very tricky…the questions I am reviewing seem to require knowing the difference between order paper and bearer paper and all the little rules in between.

Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!

CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree

[teeteenounouche]

I'll take stab at answering your question but I couldn't find any easy way to remember it all:

the maker has primary resp on a note

the drawer (bank) has secondary resp on a draft and anyone who signs the instrument (unless written “without recourse”)

Are you referring to negotiability when you say 15 transfers? This can get very tricky…the questions I am reviewing seem to require knowing the difference between order paper and bearer paper and all the little rules in between.

Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!

CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree

[NYCaccountant]

I thought the bank would be the Drawee on a check (Draft) and the Maker would be the Drawer? Also, the bank would have primary liability if they accepted the draft. Yes, I was referring to the negotiability of the instrument between 15 different parties. I'm using Wiley and they have a good bulk of the questions on contractual liability between parties.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

I thought the bank would be the Drawee on a check (Draft) and the Maker would be the Drawer? Also, the bank would have primary liability if they accepted the draft. Yes, I was referring to the negotiability of the instrument between 15 different parties. I'm using Wiley and they have a good bulk of the questions on contractual liability between parties.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[Anonymous]

the Maker cannot be a Drawer. that wouldn't make sense..

A Maker can be a Maker of a Note(ie promise note or a cert. of deposit)

and yeah, you have to just keep on reviewing what is order paper and bearer paper..

the way i remembered primary and secondary liability is strictly by just looking at the wiley book:

Primary:

Maker

Drawee(like a bank, unless Drawee doesn't want to accept liability, then drawer is or endorser(both secondary parties are liable).

Secondary:

Drawer

Endorser

i repeat MDDE a few times…

REG is a the most hardcore subject. these nit picky rules are a killer…

[Anonymous]

the Maker cannot be a Drawer. that wouldn't make sense..

A Maker can be a Maker of a Note(ie promise note or a cert. of deposit)

and yeah, you have to just keep on reviewing what is order paper and bearer paper..

the way i remembered primary and secondary liability is strictly by just looking at the wiley book:

Primary:

Maker

Drawee(like a bank, unless Drawee doesn't want to accept liability, then drawer is or endorser(both secondary parties are liable).

Secondary:

Drawer

Endorser

i repeat MDDE a few times…

REG is a the most hardcore subject. these nit picky rules are a killer…

[NYCaccountant]

Somehow I believe the person who writes the check is the Maker and the bank in this instance is the drawee. I thought Maker and Drawer are virtually the same thing.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

Somehow I believe the person who writes the check is the Maker and the bank in this instance is the drawee. I thought Maker and Drawer are virtually the same thing.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[Anonymous]

im not sure how it is in real life, but in the wiley books and other books i looked up, there is a distinction between maker and drawer..

[Anonymous]

im not sure how it is in real life, but in the wiley books and other books i looked up, there is a distinction between maker and drawer..

[teeteenounouche]

Ok checked my other set of notes: the names for each party changes with respect to a note or draft…this is why its so confusing

Types of Commercial Paper – substitute for money and extension of credit.

1. Promissory Note – where one party (maker) promises to pay another party (payee).

2. Certificate of Deposit – bank issued promissory note.

3. Draft – where one party (drawer) issues another party (drawee) to pay someone else (payee).

4. Trade acceptance

5. CheckDrawer – individual who issues another (drawee) to pay someone else (payee).

Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!

CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree

[teeteenounouche]

Ok checked my other set of notes: the names for each party changes with respect to a note or draft…this is why its so confusing

Types of Commercial Paper – substitute for money and extension of credit.

1. Promissory Note – where one party (maker) promises to pay another party (payee).

2. Certificate of Deposit – bank issued promissory note.

3. Draft – where one party (drawer) issues another party (drawee) to pay someone else (payee).

4. Trade acceptance

5. CheckDrawer – individual who issues another (drawee) to pay someone else (payee).

Florida:
AUD: 73, 81! Thank you Lord!
BEC: 73, 77! Thank you Lord! and WTB
REG: 71, 82! Thank you Lord! and A71
FAR: 72, 78! Thank you God and my Mommy in Heaven!

CPA Excel, Ninja Notes & Audio, Wiley Test Bank, CPAreviewforfree

[Anonymous]

My understanding of the main difference and what distinguishes a maker and a drawer is that when you promise to pay, you're a maker. You're making a promise. When you order a third party to pay, you're a drawer. You're drawing on a third party. Notes and CDs are promises to pay, whereas drafts such as checks and trade acceptances are orders to pay. The person who makes a note is going to pay it. The person who draws on a bank is not going to pay it, the bank is.

That's why as a maker, you're primarily liable, because you're the party that's going to pay since there are only two parties. After the maker, there are only the endorsers to hold secondarily liable.

As the drawer, you're secondarily liable if your drawee (your bank in the case of a check) doesn't pay, i.e., doesn't accept or dishonors your draft. After the drawee, you go to the drawer and the endorsers.

It's hard for me to picture endorser liability. The first endorser on a check would be the payee, let's say, Ann. And let's say Ann gave a blank endorsement (on the back) and delivered the check to, say, Jeff. So if my bank doesn't honor my check, Jeff, a holder in due course, will come to me and then to my original payee, Ann, if I don't pay, because Jeff gave value to Ann, so Ann owes him something.

Unless you're taking REG in the last day of the window like me, none of this will help you anyway!

[Anonymous]

My understanding of the main difference and what distinguishes a maker and a drawer is that when you promise to pay, you're a maker. You're making a promise. When you order a third party to pay, you're a drawer. You're drawing on a third party. Notes and CDs are promises to pay, whereas drafts such as checks and trade acceptances are orders to pay. The person who makes a note is going to pay it. The person who draws on a bank is not going to pay it, the bank is.

That's why as a maker, you're primarily liable, because you're the party that's going to pay since there are only two parties. After the maker, there are only the endorsers to hold secondarily liable.

As the drawer, you're secondarily liable if your drawee (your bank in the case of a check) doesn't pay, i.e., doesn't accept or dishonors your draft. After the drawee, you go to the drawer and the endorsers.

It's hard for me to picture endorser liability. The first endorser on a check would be the payee, let's say, Ann. And let's say Ann gave a blank endorsement (on the back) and delivered the check to, say, Jeff. So if my bank doesn't honor my check, Jeff, a holder in due course, will come to me and then to my original payee, Ann, if I don't pay, because Jeff gave value to Ann, so Ann owes him something.

Unless you're taking REG in the last day of the window like me, none of this will help you anyway!

[CPA soon]

I am not sure if this is what you are referring to? Your question is a bit confusing.

With multiple creditors in the same collateral, the general rule is the first to file or perfect has priority.

Exception: A PMSI creditor in non-inventory collateral (e.g., equipment) has priority if (s)he files

within 20 days of attachment.

Exception: A PMSI creditor in inventory collateral has priority if (s)he files prior to the debtor getting

possession and gives written notice to creditors ahead of him prior to the debtor getting possession.

Collateral perfected in one state and moved to another state remains perfected for 4 months after

arriving in the new state.

FAR - 71, 68, 74, (8/31/14) 78 ✔
REG - 67, 71, 71, (10/18/14) 78 ✔
BEC - (11/29/14) 86 ✔
AUD - 73, (4/4/15) 86 ✔

I can't believe this is over! 2 years and 3 months..

[Author]

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