Question

business law 1090

Promissory Note 1, Sam Smith, do promise to pay Adele Alberts the sum of $2,000 within ten (10) days of the sale of my vintage 1957 Chevy. Signed, S.S. Sam Smith owed Adele Alberts some money. He wrote out the above promissory note. Discuss the elements of negotiability and whether each one has been met. Then declare whether the note is negotiable. *For all the discussion forums you must be citing to your textbook. You must have a pinpoint citation for full credit. Keep in mind that failing to cite sources (your textbook or any outside resources) is plagiarism. If you

Answer 1

The concept of negotiability is one of the most important features of commercial paper, a contract for the payment of money. When dealing with negotiable instruments, there are six elements of negotiability. If it fails one of these tests, it is non negotiable. All of these must be on the front of the document.

1. Must be in writing. Makes it easily transferable.

2. Must be signed by the maker or drawer - The person must have intent to be willingly bound to the document. The signature can be anywhere on the front of the document.

3. There must be an unconditional promise or order to pay - This means that I.O.U.s cannot be considered as negotiable instruments.

4. There must be fixed amount of money - Commodities such as gold, gold bullion, etc cannot be used. However, foreign currencies can be used because the exchange rate is assumed known.

5. It must be payable on demand or at a definite time - If no date on the instrument then it makes it non-negotiable.

6. Payable to the order or to the bearer.

In the given case, the promissory note was in writing and signed by the maker, Sam Smith payable to Adele Alberts a fixed amount of money, $2,000 within a definite time of 10 days. However, there was a condition to the payment of money. Sam would only pay within 10 days of his sale of car, a vintage 1957 Chevy. This is a conditional payment as the date of sale of his car is not known and as such cannot be construed as a negotiable instrument as per the elements of negotiability.