Elements of a Negotiable Instrument - Essay Example

Does the instrument in question meet the requirements of negotiability under the Uniform Commercial Code? This question can best be dealt with by comparing the elements of a negotiable instrument under the Uniform Commercial Code with the instrument in question. These elements are:

• It should be in writing.

Writing can be on anything that is permanent and has portability (3-103 UCC). Since the above instrument is written, there appears to be no contention that the instrument in question meets the first requirement.

• It must be signed by the maker.

This is intended to authenticate it (3-401 UCC). Bob by handing over a pen to the maker in this question implicates that he wants the maker to put his signature and make him be bound by the document. The maker here will be bound by making any mark on the instrument which purports to be a signature.

• Should be unconditional promise or order

“The promise must be an affirmatively written undertaking more than a mere acknowledgment of a debt” (Howard 1964). Apart from acknowledging that he has a debt amounting to $20 000 plus interests the maker further makes an affirmative undertaking to discharge the debt. This can be ascertained by the use of the phrase ‘I promise to pay.

Payment cannot be conditional and the promise or order cannot be subject to rights or obligations stated in another source save for any exception provided by the Uniform Commercial Code. The document in question does not imply any condition. Take for instance if the document was worded in the following manner;

“I promise to pay to the order of Bobs Auto Emporium $20 000 with interest...defaulting by which I shall be liable to pay double the value of interest”, this is a prima facie case of a condition and such an instrument shall be void (Martindale 2011).

• Fixed amount at a definite time

Any instrument payable in money is negotiable (3-304 UCC). The above instrument is payable at a fixed amount of $20 000 and hence satisfies this test of negotiability. The Uniform Commercial Code further provides that the time should be definite and ascertainable at the time the instrument is made. The instrument in this question states the date it is made, however, determining the time over which the interest is paid poses a difficult task notwithstanding the leeway given by the Uniform Commercial Code as to the reference to other sources (UCC 3-112). This is partly because the question does not make reference to any other external source. Through this rule, the instrument shall then fail the test of negotiability under the Uniform Commercial Code and hence invalid.

A party shall not be liable unless a representative or in-person signs or makes any mark on the document purporting to be a signature. Generally, the instrument shall not be transferable for failing the test of negotiability under the Uniform Commercial Code.