Also known as: negotiable promissory note · negotiable instrument
Written by attorneys · grounded in primary & secondary sources — see below
An unconditional promise to pay a fixed amount of money, with or without interest, that is payable to bearer or to order at issuance or first possession, on demand or at a definite time, and contains no other undertaking except as permitted by statute.
Prairie Sky issued convertible promissory notes to Nathaniel accompanied by a white paper falsely claiming five hundred test hours. Crown Aero later purchased the notes from Nathaniel after reviewing the attached materials and suffered loss when the true hours proved far lower. Crown Aero may recover pecuniary damages from Prairie Sky because the misrepresentation traveled with the notes into the secondary transaction.
Gate Motor performed repairs for Summit Wheels and received a negotiable promissory note instead of an open account. Gold Vehicle held a security interest in Gate Motor's payment rights. Summit Wheels is not an account debtor because the obligation is evidenced by the negotiable note rather than an account.
Select any source to read its text and confirm it supports the definition.
Industrial Motors sold Carlos's negotiable promissory note to a securitization trust whose trustee later misplaced the original instrument. The trustee filed foreclosure but could not produce the note. The trustee may commence foreclosure only after proving it is the person entitled to enforce the lost note under applicable lost-instrument rules.
Nina Nielsen signed a writing containing an unconditional promise to pay Nexus Financial a fixed sum on demand. The writing stated it was payable to the order of Nexus Financial and contained no additional undertakings. The writing qualifies as a negotiable promissory note under the governing definition.
Nestor Navarro executed a writing that satisfied every requirement for negotiability. The writing is therefore an instrument, meaning it is a negotiable instrument subject to the rules governing enforcement and transfer of such paper.
Only the person entitled to enforce the note may commence foreclosure. That party must either possess the original note with enforcement rights or, if the note is lost, satisfy the jurisdiction's lost-note requirements including proof of prior possession and protection against double liability.
No. The definition of account debtor expressly excludes persons obligated to pay a negotiable instrument even if the instrument evidences chattel paper. The exclusion applies directly once the obligor executes a negotiable note rather than remaining on open account.
A secondary purchaser may recover when the misrepresentation is embodied in the negotiable instrument or attached commercial document and the purchaser deals with the instrument in justifiable reliance on the representation. Sophistication and failure to verify may defeat the justifiable-reliance element.
The person with control of the transferable electronic record stands in the same position as the holder of a paper negotiable instrument and is the only party entitled to commence foreclosure. Control substitutes for physical possession of the original note.