A Negotiable Instrument in Business Law - Essay Example

A negotiable instrument is a promissory note as Elle unconditionally promise to pay Frank a sum of $ 600 on or before six months from the date of writing the note. Nonetheless, this instrument is not negotiable since for an instrument to be negotiable there must be certain conditions, which should be fulfilled. In this case, the instrument does not have a signature hence it is not negotiable. Drawer of a negotiable instrument other than making an unconditional promise to pay should be signed in order for the document to be binding. Unfortunately, Elle may, later on, claim that she never wrote the note since her signature does not appear. It is essential for negotiable instruments to have the signature of the drawer.

1. Discount Stores, Inc., borrows $5,000 each from EZ Loan Corporation, First National Bank, and Great Products Corporation. Discount uses its "present inventory and any thereafter acquired" to secure the loans from EZ Loan and First National. EZ Loan perfects its interest on April 1, followed by First National on April 5. Discount buys new inventory on April 10 from Great Products and signs a security agreement, giving Great Products a purchase-money security interest in the new inventory. On the same day, Great Products perfects its interest and notifies EZ Loan and First National. The discount takes possession of the new inventory on April 15. On April 20, Discount defaults on all of the loans. Whose security interest has priority?

According to the Personal Property Securities Act 1999, the general rule for priority of financing statement as provided for in Section 66 affirms that any perfected security interest within an agreement has the priority or capability over the unperfected security interest of the same collateral that has been used in the agreement. On a different perspective, the same Section 66 provides that the party who was able to perfect it first should determine priority experienced between perfected securities interests within common collateral. In this case, the first to perfect its interest was Great Products and thus they have the responsibility and authority to perfect the security. In summary, the Great Products Corporation’s security has priority.