Also known as: negotiable papers · negotiable instrument · commercial paper
Written by attorneys · grounded in primary & secondary sources — see below
A written instrument signed by the maker or drawer that contains an unconditional promise or order to pay a fixed sum of money, payable on demand or at a definite time, and payable to bearer or to order.
Neil Nair issues a promissory note to Nicole Navarro that falsely states the value of pledged equipment. Navarro transfers the note to a third party who advances funds in reliance on the representation. The third party later discovers the falsity and suffers a loss when the equipment proves worthless.
Northstar Logistics receives progress-payment checks drawn on the United States Treasury. A state-chartered bank claims priority under local assignment rules after an alleged forgery. The court applies a single federal standard to determine rights in the checks rather than varying state rules.
Select any source to read its text and confirm it supports the definition.
Navarro Industries executes a negotiable promissory note to Nordic Ventures for equipment repairs. Gold Vehicle holds a security interest in Nordic's accounts. Summit Wheels, obligated on the note, is not treated as an account debtor under the security agreement.
Nia Nkosi borrows from Valley Credit Union on a note secured by her home. The note is stolen before assignment to Apex Auto Finance. Apex cannot commence foreclosure until it satisfies the lost-instrument requirements to establish enforcement rights.
Nalini Narula signs a writing promising to pay Nova Pharmaceuticals a fixed sum on demand. The writing contains no conditions and is made payable to bearer. The instrument qualifies for treatment as negotiable paper under the governing definition.
Nigel Nelson receives a time draft that meets all statutory criteria for negotiability. The draft is later transferred to Naomi Norton. The transferee treats the draft as an instrument subject to the rules governing negotiable paper.
The writing must be signed by the maker or drawer, contain an unconditional promise or order to pay a fixed amount of money, be payable on demand or at a definite time, and be payable to bearer or to order.
Supporting sources
A person obligated on a negotiable instrument is excluded from the definition of account debtor even when the instrument evidences chattel paper.
Only the person entitled to enforce the note under UCC Section 3-301, or a person who satisfies the lost-instrument requirements, may commence foreclosure.
Federal common law supplies a uniform rule for negotiability and related rights whenever the checks implicate uniquely federal interests, regardless of subsequent state-chartered bank handling.
…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…