Also known as: negotiable notes · negotiable instrument
Written by attorneys — see sources below.
A written instrument that is signed by the maker or drawer, includes an unconditional promise or order to pay a specified sum of money, is payable on demand or at a definite time, and is payable to order or to bearer. The term encompasses promissory notes and similar commercial documents that circulate freely in commerce.
Nancy Nelson sold a parcel of land to Norman Nash and included in the purchase-money note a statement that the property had no known environmental contamination. Norman later discovered the statement was false and suffered losses when he resold the land. Norman may recover from Nancy for the pecuniary harm caused by justifiable reliance on the false statement embodied in the negotiable note.
Nimbus Cloud sold equipment to Nordic Ventures on credit and took back a negotiable promissory note. When Nimbus granted a security interest in its receivables to National Trust, the bank sought payment directly from Nordic. Nordic is not an account debtor because its obligation runs on the negotiable note rather than an account.
Natalie Norris borrowed from Nightingale Healthcare on a home equity loan evidenced by a negotiable note secured by a mortgage. The note was stolen during a branch burglary before any assignment. Nightingale assigned the loan to Noelle North, who seeks to foreclose without producing the original note or satisfying lost-instrument requirements. Only a person entitled to enforce the note or who proves the lost note under statutory procedures may commence foreclosure.
Nathaniel Newman signed a writing promising to pay Nicole Navarro $50,000 on demand, payable to her order, with no conditions or additional promises. The writing meets every statutory element and therefore qualifies as a negotiable note that can be transferred free of many defenses.
Norman Nash executed a promissory note meeting all criteria under UCC Article 3. When the holder later refers to the writing simply as an instrument in a security agreement, the reference is understood to mean the negotiable note itself.
Noelle North received a negotiable note from Nathaniel Newman in payment for services. When she transferred the note to a third party in satisfaction of her own antecedent debt, the transferee took the instrument free of certain personal defenses that might have existed between the original parties.
Swift, a citizen of Maine, instituted an action in the circuit court of New York against Tyson on a bill of exchange that Tyson had accepted in New York. The acceptance and indorsement of the bill were admitted at trial. Swift had taken the bill before it became due in payment of a promissory note due to him from Norton & Keith. He was a bona fide holder without notice who believed the bill was justly due. Tyson had accepted the bill as part consideration for lands sold by Norton & Keith, to which those parties had no title and which were of little or no value. The defendant offered to prove that the acceptance had been given under circumstances involving misrepresentation of the quality of the lands and imposition by fraud on the part of the drawer and co-owners. The circuit judges divided on the question of whether, under these facts, the defendant had available to him the same defense against Swift as he would have had against the original parties to the bill. This division resulted in certification of the question to the Supreme Court for resolution.
View caseOnly the person entitled to enforce the note under UCC Section 3-301, or a party that satisfies the lost-instrument requirements of Section 403, may commence foreclosure. Ownership of the debt alone is insufficient without possession or compliance with those procedures.
A person obligated on a negotiable instrument is expressly excluded from the definition of account debtor even if the instrument evidences chattel paper. The exclusion prevents application of certain Article 9 rules that otherwise govern account debtors.
The writing must contain an unconditional promise or order to pay a fixed amount of money, be payable to bearer or to order at issuance or first possession, be payable on demand or at a definite time, and lack any undertaking or instruction that would destroy negotiability.
Yes. One who incorporates a fraudulent misrepresentation into a negotiable instrument is subject to liability for pecuniary loss to another who justifiably relies on the truth of the representation when dealing with the instrument.
…land and co-operators in the sale. The bill accepted had been received bona fide and before it was due. A bona fide holder of a negotiable instrument for a valuable consideration, without any notice of facts which implicate its validity as between the antecedent parties, who takes it under an indorsement made before it becomes due, holds…