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 you have received is commonly known as a promissory note. A promissory note is a written promise to pay a specified amount of money within a certain time frame. It is typically used when one party borrows money from another party and agrees to repay it with interest. In this case, the promissory note states that you promise to pay Bob's Auto Emporium $20,000 with 7% interest.
Now, let's determine whether this instrument meets the requirements for negotiability under the UCC (Uniform Commercial Code). The UCC provides guidelines for determining whether a negotiable instrument can be freely transferred between parties and carries certain legal rights.
To meet the requirements for negotiability under the UCC, an instrument must satisfy the following criteria:
1. It must be in writing.
2. It must be signed by the maker or drawer.
3. It must contain an unconditional promise or order to pay a fixed amount of money.
4. It must be payable on-demand or at a definite time.
5. It must be payable to order or to bearer.
6. It must not contain any additional promises, conditions, or undertakings that can destroy the negotiability.
In this case, the document you have received is in writing and signed by you, the maker of the promissory note. It contains an unconditional promise to pay a fixed amount of $20,000 with a specified interest rate of 7%. The instrument does not specify if it is payable on-demand or at a definite time, but it does not contain any conflicting information either.
However, the document does not indicate whether it is payable to order or to bearer, which is a requirement for negotiability under the UCC. Therefore, based on the information provided, it appears that this instrument does not meet all the requirements for negotiability under the UCC.