Formal requirements of negotiability

Question 1

What are the 6 requirements for a instrument to be negotiable

Answer 1

1. It must in writing (tangible form) and signed by the maker/drawer
2. The promise/order to pay must be unconditional
3. The payment obligation must be for a fixed amount of money
4. The writing must be payable to bearer or order
5. The writing must be payable on demand or at a definite time
6. The writing must only obligation the payor to pay and nothing else

Question 2

The Promise/Order to pay must be unconditional which means

Answer 2

Express conditions are not allowed. The instrument cannot be subject to another writing (referencing another document is fine)

Question 3

The payment obligation must be for a fixed amount of money which means

Answer 3

The principal amount due on the instrument must be for a fixed amount of money. However, interest can be variable.

Question 4

A negotiable instrument must be payable in bearer or order which means

Answer 4

Order- Must say “pay to order of or “his order” -Payable to specific person

Bearer- Any instrument that does not attempt to pay a specific person (Payable to bearer, payable to the order of bearer, payable to cash, Payee line left blank

Question 5

If a writing has characteristics of both order and bearer paper then

Answer 5

The instrument will be treated as bearer paper

Question 6

An instrument that is payable on demand means

Answer 6

That the payee or holder can present the instrument immediately after being issued the instrument

Question 7

An instrument that is payable at a definite time means that

Answer 7

The payee or holder can present the instrument at a future rime that is clear or ascertainable

Question 8

An instrument cannot contain an provision that permits the obligor to extend the payment at his discretion without any restriction

Answer 8

And a Payment date must be readily ascertainable

Question 9

An instrument that does not specify the exact amount of interest

Answer 9

Then the interest to be at the “judgement rate” in the jurisdiction of the place of payment in the jurisdiction