You are interested in buying a new car and Bob let's you borrow one of the new cars on his lot for a week to test drive. You decide you like the car and when you visit Bob to drop off the car, he hands you the following document and a pen:
May 1, 201x
I promise to pay to the order of Bob's Auto Emporium $20,000 (Twenty thousand dollars) with interest at the rate of 7% per annum.
What type of instrument is this? Does this instrument meet the requirements for negotiability under the UCC?
From the information provided here I would assume that instrument is a promissory note. A promissory note is a written instrument signed by a maker unconditionally promising to pay a certain sum in money to a payee or a holder on demand or on a specified date.
This note does not meet the requirements for negotiability under the UCC for a few reasons. The note does not specify a payer’s name nor does it say “bearer”. The note also fails to have a specified definite time that the note is payable by and it does not say “on demand”. The note was not signed by you; therefore you have no legal requirements to pay the note because it was not an arranged agreement between you and Bob. In other words, the note has no endorsement. We cannot tell, with the information given, if this note was supposed to be a mortgage note (although it is assumed it was not), installment note (could possibly have been), or a collateral note (also possible) because the terms of the note are not clearly written.
In short, for a note to be negotiable, it must meet all of the following requirements: It must be in writing; it must be signed by the maker or drawer; it must be an unconditional promise or order to pay; it must state a fixed amount of money; it must be payable on demand or at a definite time; it must be payable to order or to bearer, unless it is a check. (Miller & Hollowell, 2011) This note clearly does not follow all six of those regulations therefore; it is worthless in the eyes...