Also known as: negotiable instruments
Written by attorneys · grounded in primary & secondary sources — see below
An unconditional promise or order to pay a fixed amount of money that meets specific formal requirements. The writing must be payable to bearer or to order at issuance or first possession by a holder. It must also be payable on demand or at a definite time and must not state any other undertaking beyond payment of money except for limited collateral or judgment powers.
Nestor Navarro sold a warehouse to Naomi Norton and included a false statement about the building's structural soundness in the promissory note he signed. Naomi later sold the note to Northstar Logistics, which relied on the statement when purchasing it. Northstar suffered a loss when the warehouse required major repairs and sued Nestor for the pecuniary harm caused by the misrepresentation embodied in the note.
Nimbus Cloud sold equipment to Noah Nakamura on credit and took back a promissory note for the price. Nimbus granted a security interest in its accounts to Nobel Dynamics. When Noah defaulted, Nobel attempted to collect directly from Noah as an account debtor, but the note's existence prevented that classification and limited Nobel's remedies to enforcement of the instrument itself.
Select any source to read its text and confirm it supports the definition.
Nicole Navarro borrowed money from Nexus Financial and signed a negotiable note secured by her home. Nexus sold the loan to Northstar Logistics, which lost the original note during file transfer. Northstar sought to foreclose and had to prove it was the person entitled to enforce the instrument under UCC 3-301 plus the facts of the loss to satisfy the lost-note requirements before commencing the action.
Nora Nash signed a writing promising to pay Neville Norton a fixed sum on a stated date and included the words "pay to the order of" Neville. The writing contained no additional undertakings beyond payment. Because the document satisfied the requirements of being payable to order, for a fixed amount, and at a definite time, it qualified as a negotiable instrument subject to Article 3 rules.
Naomi Norton received a signed writing from Nestor Navarro that met all criteria for negotiability. When the writing was transferred, the parties treated it as an instrument under Article 3 because the statute expressly equates the term instrument with a negotiable instrument for purposes of enforcement and transfer rules.
Noah Nakamura stole a bearer promissory note from Nora Nash and transferred it to a third party for value. The third party took the note without knowledge of the theft. Because the note was payable to bearer, the thief possessed power to pass title to a good-faith purchaser even though Nora never consented to the transfer.
The writing must contain an unconditional promise or order to pay a fixed amount of money. It must be payable to bearer or to order when issued or first possessed by a holder. It must also be payable on demand or at a definite time and must not contain other undertakings except limited collateral protections.
Supporting sources
Only the person entitled to enforce the instrument under UCC 3-301 may commence foreclosure. If the note is lost, stolen, or destroyed, that person must also satisfy the jurisdiction's lost-note requirements to protect the borrower from double liability.
Supporting sources
A person obligated on a negotiable instrument is excluded from the definition of account debtor even if the instrument evidences chattel paper. This exclusion prevents secured parties from treating note obligors as account debtors under Article 9.
Supporting sources
The maker who includes the misrepresentation is subject to liability for pecuniary loss to anyone who justifiably relies on the truth of the representation when dealing with the instrument or a third party regarding it.
Supporting sources
…Between Citizens of Different States (1933) 19 A.B.A.J. 71, 74-75; Beutel, Common Law Judicial Technique and the Law of Negotiable Instruments — Two Unfortunate Decisions (1934) 9 Tulane L. Rev. 64. [^maj-23]: Kuhn v. Fairmont Coal Co. , 215 U.S. 349, 370-372; Black & White Taxicab Co. v. Brown & Yellow Taxicab Co. , 276 U.S.…