The facts of this case are as follows: For one week, I test drove a vehicle, which was loaned to me by Bob (of Bob’s Auto Emporium). Upon return of the vehicle, Bob handed me a piece of paper stating I would promise to pay Bob’s Auto Emporium the sum of $20,000 with interest at the rate of 7% per annum. From the facts of this case, the instrument I was given was actually a “note” and it does not meet the requirements for negotiability under the Uniform Commercial Code.

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According to Section 3-104 of the Uniform Commercial Code (or UCC), a negotiable instrument is one with “an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise of order” if it fulfills three factors: payable to the bearer at time of issuance, payable on demand (or at a definite time) and does not promise to do any act in addition to the payment of money (Legal Information Institute).

Considering this “instrument” as it is described, it is not negotiable because it does not fulfill two of the required factors. First, it is not payable to the bearer at the time of issuance, because it is actually a “promise” to pay, not an actual payment. Second, it is not payable on demand or at a definite time; in fact, there is absolutely no definitive time assigned to the transaction, meaning the amount could presumably be paid ad infinitum. In a legal context, this would be a faulty promissory note or contract, as it does not designate a given time when the payment must occur.

Finally, this instrument is considered a “note”, according to UCC Article 3, §104(e) as follows: “An instrument is a “note” if it is a promise” and §3-103(a)(9), which defines a promise:
“Promise” means a written undertaking to pay money signed by the person undertaking to pay. An acknowledgment of an obligation by the obligor is not a promise unless the obligor also undertakes to pay the obligation. (Legal Information Institute)
Because the instrument is actually a promise (as defined), it is therefore considered a note. And it does not meet the requirements for negotiability because it fails two of the three required factors, according to §3-104(a).