National Check Professional (NCP) Certification Practice Test

What type of instruments does Article 3 of the UCC deal with?

1. Bank deposits

2. Negotiable instruments

3. Consumer rights

4. Property laws

The correct answer is: Negotiable instruments

Article 3 of the Uniform Commercial Code (UCC) specifically addresses negotiable instruments, which are financial documents that guarantee the payment of a specified amount of money either on demand or at a set time. Examples of negotiable instruments include checks, promissory notes, and drafts. The purpose of this Article is to provide a legal framework for the creation, transfer, and enforcement of these instruments, ensuring that they are recognized in commercial transactions as legitimate and enforceable. Understanding the context of negotiable instruments is crucial, as they play a significant role in commerce and finance by enabling the transfer of money in a secure and legally binding way. The rules and definitions provided in Article 3 allow for clarity in the rights and responsibilities of parties involved in the transfer of these instruments, ensuring that transactions can proceed smoothly and are supported by a consistent legal foundation.