Also known as: negotiable bills · negotiable instrument
Written by attorneys — see sources below.
An unconditional promise or order to pay a fixed amount of money that is payable to bearer or to order at the time it is issued or first comes into possession of a holder, payable on demand or at a definite time, and does not state any other undertaking by the person promising or ordering payment.
Nimbus Cloud issues a negotiable bill promising payment for goods that it knows were never shipped. Nadia Novak purchases the bill from a third party in reliance on the representation of shipment. When the goods fail to arrive, Nadia suffers a loss and may recover from Nimbus Cloud for the misrepresentation embodied in the bill.
Northstar Logistics owes payment on a negotiable bill issued by Nobel Dynamics for delivered parts. When Nobel Dynamics grants a security interest in its receivables to a lender, the lender cannot treat Northstar Logistics as an account debtor because the obligation is on the negotiable bill rather than an account.
Nancy Nelson executes a negotiable bill secured by her home mortgage in favor of Neptune Energy. After a merger the surviving entity loses the original bill during record transfer and attempts foreclosure without proving prior possession or lost-instrument requirements. The court denies standing because only the person entitled to enforce the negotiable bill may commence foreclosure.
Nalini Narula signs a document promising to pay Noah Nakamura a fixed sum on a stated date but adds a conspicuous statement that the promise is not negotiable. Because the document contains that statement at issuance, it fails to qualify as a negotiable bill even though it otherwise meets the promise and timing criteria.
Norman Nash receives a signed writing that qualifies as a negotiable bill under the governing statute. The writing is therefore an instrument, allowing Norman to claim holder status and the protections that attach to instruments in commercial transactions.
The writing must contain an unconditional promise or order to pay a fixed amount of money, be payable to bearer or to order, be payable on demand or at a definite time, and contain no other undertakings by the maker or drawer.
Only the person entitled to enforce the negotiable bill under UCC Section 3-301 may commence foreclosure. If the bill is lost, the claimant must also satisfy lost-instrument requirements including proof of prior possession.
The UCC definition of account debtor expressly excludes persons obligated to pay a negotiable instrument even when the instrument evidences chattel paper, because enforcement rights and priorities differ for instruments.