A Negotiable Instrument

ANegotiable Instrument

ANegotiable Instrument

Inthe present case study, Bob, a car dealer issues a potential buyerwith an instrument stating that the buyer promises to pay $ 20,000and a 7 % interest per annum to the stated firm, Bob’s AutoEmporium. The instrument in question is a promissory note because thepotential buyer makes a promise of paying the stated amount to theseller. A promissory note is defined as a promise that is made by oneparty, signed, and unconditional stating that the party will pay somespecified amount of money on demand to the specified party and at aspecified time (Nolo, 2014). Some of the few elements indicating thatthe instrument was meant to be a promissory note include theinclusion of the word promise, specified amount that needs to be paidat some specified time, made in writing, unconditional promise, andthe specified holder of the note.

However,the instrument does not meet the qualities of a promissory note underUCC because there are several critical elements that are missing.First, the note fails to state that the sum of $ 20,000 should bepayable on demand or after some definite time, which is a basicrequirement of a valid promissory note (Malhotra, 2015). Secondly,the note fails to state the name of the payer and include the term“bearer”, which makes it an incomplete promissory note. Third,the information provided does not indicate that the person who isexpected to make the payment signed the instrument, which reduces itscapacity to make it an arranged agreement between the promisingperson and the expected recipient of the promised amount. Therefore,the instrument in the case study can be regarded as an incompletepromissory note.


Malhotra,S. (2015). Eleven essential elements of a promissory note. Experts.Retrieved July 9, 2015, fromhttp://www.shareyouressays.com/112065/11-essential-elements-of-a-promissory-note-with-specimen

Nolo(2014). Understanding promissory notes for small businesses. Nolo.Retrieved July 9, 2015, fromhttp://www.nolo.com/legal-encyclopedia/understanding-promissory-notes-small-businesses-29729.html