II. Requirements

Question 1

Requirements for Negotiability

Answer 1

1. Writing
2. Signed by maker or drawer
3. Unconditional
4. Promise to Pay or Order to Pay
5. Fixed Amount
6. In Money
7. No other undertaking or instruction
8. On Demand or at a definite time
9. “To Order” or “To Bearer”

Question 2

Writing

Answer 2

All writings must TANGIBLE

Question 3

Signed by Maker or Drawer

Answer 3

• INTENT whether something is meant to serve as a signature
  
  • any symbol used will suffice

Question 4

Unconditional

Answer 4

• Any condition will destroy negotiability
• Mere reference to another agreement will not destroy it, however.
  
  • incorporation of subject to contract does destro yti
• NOT CONDITIONAL: collateral, acceleration, particular source of funds, requiremetn of countersignature

Question 5

Promise to pay or order to pay

Answer 5

• IOU is not negotiable–it is not a promise to pay
• I wish you would pay is not an order to pay
  *

Question 6

Fixed Amount

Answer 6

• the holder must able to determine from the instrument the principal due
  
  • not apply to interest or other charges–can refer to outside source

Question 7

In money

Answer 7

Cash–including foreign money

Question 8

No other undertaking or instruction

Answer 8

• “Courier without luggage”: not coupled with other undertakings, except when something strengthens the promise to pay but has no independent value SUCH AS
  
  • collateral to secure payment
  • power to confess judgment or realize collateral
  • waiver of benefit of any law intedned for ptoection of obligor

Question 9

On Demand or at a Definite Time

Answer 9

• Need not be dated–but must otherwise be definite
  
  • if not dated, payable on demand
• ACCELERATION CLAUSE: may allow holder power of accelerations b/c it’s limted on the back end
• EXTENSION CLAUSE: allowed if extension is to another definite time in the instrument
  
  • can always extend time to receive payment (holder only)
    *

Question 10

To Order or To Bearer

Answer 10

• Magic words: either bearer or order
  
  • EXCEPT: checks that just say payable to someone
  • BEARER PAPER: if not otherwise indicating payment to a particular person

Question 11

Power of Negotiation