Question

Legal Environment (Business Law 5th Ed) Case study.

The case illustrates important principles concerning the rights of creditors who accept transferred notes and the rights of the payee who signed a promissory note.

Mr. Anderson promised by signed note to pay on schedule for delivery of trees from a nursery. The nursery transferred Anderson's note to a financial company as a negotiable instrument. When the nursery failed to deliver the trees, Anderson refused paying the company holding his note-then investment firm sued him and claimed they had no obligation regarding the delivery of trees.

You be the judge:

1. What was the defense of First Investment to Anderson's claim he owed them no money for no trees? 2. How was the writing of Anderson's note vital to negotiability and obligations of either party? 3. Should Anderson be required to honor his promise or should he be released from the debt-explain your legal reasoning?

Thank you very much in advance. May God bless you...

Answer 1

(1): The defense of First Investment to Anderson's claim he owed them no money for no trees was that First Investment had no obligation with regards to the delivery of the trees. The obligation with regards to the delivery of the trees solely rests with the nursery with whom Anderson had entered into a contract for delivery of trees.

(2): The writing of Anderson's note states that he will pay on schedule. There is no mention with regards to the use of the words – payable to order or bearer. Without these words the promissory note issued by Anderson will not be considered as a negotiable instrument and hence the power of the payee or the bearer is limited. In this case only the nursery can present the note for payment.

(3): Anderson should be released from his debt. This is because, as explained above, his promissory note will not be regarded as a negotiable instrument and hence only the nursery can present the note for payment. Anderson had entered into a legal contract with the nursery and as per the contract the payment is for the delivery of goods. In case of non-delivery Anderson is free from his obligation to pay in the contract.