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?
The document handed to you by Bob is known as a promissory note. A promissory note is a legal document that contains a promise to pay a certain amount of money to the named party or their order. In this case, the document promises to pay Bob's Auto Emporium $20,000 with interest at a rate of 7% per annum.
To determine whether this promissory note meets the requirements for negotiability under the Uniform Commercial Code (UCC), we need to evaluate the following criteria:
1. Unconditional promise to pay: The promissory note contains an unconditional promise to pay a specific amount of money, which is $20,000 in this case. Therefore, this requirement is met.
2. Fixed amount: The amount of $20,000 is a fixed sum, which satisfies the requirement for negotiability.
3. Payable to order or bearer: The note does not specify whether it is payable to a specific person or to the bearer, so it does not meet this requirement.
4. Payment term: The promissory note does not mention a specific due date or timeline for repayment, which may render it non-negotiable.
Based on the given information, the note does not meet all the requirements for negotiability under the UCC. It does not specify whether it is payable to order or bearer, and it lacks a specific payment term. These factors limit its ability to be freely transferred or negotiated to another party.