Also known as: rights to enforce the instrument · enforcement rights · UCC 3-301
Written by attorneys · grounded in primary & secondary sources — see below
A right arising under the law of negotiable instruments that permits the possessor of an instrument to demand payment from the party obligated on it. The right is acquired when the instrument is delivered by a person other than its issuer for the specific purpose of conferring enforcement authority on the recipient.
Raymond Ramos holds a promissory note issued by a third party. He delivers the note to Reliance Insurance with the stated purpose of allowing Reliance to collect the amount due. Reliance may then demand payment from the maker because the delivery transferred the right to enforce the instrument.
Rachel Ramirez receives a negotiable note by delivery from its prior holder for the purpose of enforcement. When the maker later tenders payment to the original holder instead of Rachel, the payment does not discharge the obligation because Rachel now holds the right to enforce the instrument.
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Delivery of the instrument by a person other than its issuer for the purpose of giving enforcement rights vests the right in the transferee even without indorsement. The transferee may then enforce the instrument directly.
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No. Once the instrument has been delivered for the purpose of transferring the enforcement right, payment must be made to the person entitled to enforce it. Payment to the prior holder does not discharge the obligation.
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The person must prove both the terms of the instrument and the right to enforce it. The court may not enter judgment unless it finds that the person required to pay is adequately protected against loss from another claim.
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