Miss AB signed a note on 1-8-2002 stating that Mr. X loaned Miss AB $ 5,000 at 6% interest for a total of $10,000. The note did not contain the payment schedule and repayment time. Later AB used the money for the startup of her business and informed orally that she will repay the loan out of the proceeds from her first 1,000 product sales but AB did not make any payments.
After that, the person X has passed away, and his son as an executor of his estate, demanded AB for the repayment in the month ( April 2010). The trail court judgement she appealed that she had repaid the note through the care she gave to Mr. X
Promissory note: A promissory note is written agreement or document made and signed by the maker, engaging those to pay on demand or at a particular time or period stating certain amount of money to the bearer.
In this situation Mr. X has made a note without mentioning the repayment date and time and after so many years his son was asking to repay the note with interest rate mentioned as per the note.
According to the negotiable instrument act the promissory note which was made on 1-8-2002 and asked for repayment after almost 8 years that is April 2010 thus the person as more years has passed, he will not have the right to claim for the repayment. Moreover the time of payment and date are not mentioned in the note, as a result the promissory note will become invalid.
On the other hand, Miss. AB was stating that she repaid the loan and previously she reported to X person that she will repay the loan out of the proceeds from her first 1,000 product sales.
Therefore, Miss AB was correct and person Y who is the son of person X cannot claim for the repayment of the note because of the mentioned reasons. Hence, Miss. AB was not liable for the repayment of the note as she already paid it to Mr. X before his death.
(a) It is negotiable by being payable to bearer or anyone written on the note. Hence, the given statement is True.
(b) Commercial paper only needs to be signed by payer not payee. Hence, the given statement is False.
(c) It only needs to reference that the paper is negotiable by the payee. Hence, the given statement is False.
(d) If the writing has conditions for payment, then it is a non-negotiable instrument. Hence, the given statement is False.
The instrument is a promissory note. There are two parties, payer and payee, and a promise to pay.
UCC 3-104 Requirements for negotiability of instruments are
i) signed by the maker
ii) payable to bearer or to order
iii) certain sum of payment
iv) definite time of payment (e.g. to be paid on August 13 th , 1980)
v) no conditional statements on how and when payments will be made (e.g. to be paid if my favorite team wins the game is conditional)
The note only satisfy conditions i, iii, iv, and v; there is a signature, certain sum with certain interest, and no conditional statements.
However, it is lacking in ii as the note does not contain terms " payable to order " or " payable to bearer ", having the term "to pay XYZ" is insufficient.
Hence, it is non-negotiable.