Business Management_SL8 by ClassOf1

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Sub: Business Management                                                                 Topic: Business Law

Types of Negotiable Instruments

Question:
On a sheet of paper, Elle writes, without her signature, “I acknowledge that I owe Frank $600,
payable out of the proceeds of the sale of my car, a 2003 Honda Civic, which I promise to advertise
‘For Sale’ next week. Payment is to be made on or before six months from today.” What type of
instrument is this? Is it negotiable? If not, why not?




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 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Business Management                                                                 Topic: Business Law

Solution:
The Instrument is merely a written paper, not even an acknowledgement of debt, as it has not been
signed by the party executing the document.

This is not a Negotiable instrument because:-

Reasons for Non Negotiability

        1.     An Unconditional promise to pay debt: - For constituting an instrument to be Negotiable
               Instrument, there must be an unconditional promise to pay a certain sum of money
               [UCC 3103(a)(9)]. The maker or executor must assume obligation to pay. Merely an
               acknowledgement of debt is not sufficient. If there are certain conditions attached to
               the obligation to pay money, then the instrument is not treated as negotiable
               instrument.
               In the given case, Elle Promise to pay is subject to the condition that proceeds shall be
               paid out of the sale of her Car, which shall be advertised next week.

        2.     Payable on demand or Specific date. The Negotiable instrument must be payable on
               demand or on specific date.
               The above instrument is neither payable on demand nor on a specific date. It specifies
               on or before six months from the date of signing and execution of instrument.

        3.     In Writing. The Negotiable instrument must be in writing. No specific format of
               Negotiable Instrument as such but it must contain an unconditional promise to pay in
               writing, which should be clear and concise. The above instrument is in writing but it fails
               to contain an unconditional promise to pay in writing.
        4.     Specific sum of Money. The obligation to pay must be for a specific sum of money. The
               amount payable must be specific not ambiguous or based on certain factors, which may
                          www.classof1.com/homework-help/BusinessManagement

 *The Homework solutions from Classof1 are intended to help students understand the approach to solving the problem and not for
                              submitting the same in lieu of their academic submissions for grades.
Sub: Business Management                                                                Topic: Business Law
              restrict its negotiability. The above case satisfies this criteria also as it specifies to pay
              sum of $ 600.
       5.     Transfer by delivery or transfer of possession. The Negotiable instrument must be
    
								
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