You are interested in buying a new car and Bob lets 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?
A written promise between two parties is a promissory note. In order for an instrument to be negotiable, it has to meet the following requirements:
1. It must be in writing.
2. It must be signed by the maker or the drawer.
3. It must be an unconditional promise or order to pay.
4. It must state a fixed amount of money.
5. It must be payable on demand or at a definite time.
6. It must be payable to order or to bearer, unless it is a check.
(Miller & Hollowell, 2011)
An analysis of the note shows that it meets most of the requirements. The note is obviously in written format and has been prepared for a signature by the maker. There is a promise to pay the fixed amount of $20,000 and is made payable to Bob’s Auto Emporium. However, the promissory note, as it is stated above, does not meet the UCC requirements because it does not include a statement as to whether it is payable on demand or at a definite time.