Chapter 25Creation and Negotiation

Other words of equivalent meaning may be used; however, to ensure negotiability, it is preferable to use the conventional words. If the instrument is not payable to order or to bearer, it is not negotiable, and all defenses are available in suits on the instrument. Case 25.2 illustrates how easy it is to overlook the magic words.

(CASE 25.2 continued) The primary issue is whether the two promissory notes were negotiable. A negotiable promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money, to order or to bearer. An instrument to be negotiable must be payable to the order or to bearer. An instrument is payable to order where it is drawn payable to the order of a speci-fied person, or to him or his order. Under the U.C.C. 70A-3-104(1)(d), one of the requirements to qualify a writing as a negotiable instrument is that it contain the time-honored “words of negotiability,” such as “pay to the order” or “pay to the bearer.” The mere promise to pay, absent the magic words “payable to order or to bearer” renders the note nonnegotiable, and the liability is determined as a matter of simple contract law. In the instant case, the notes were payable simply to the payee, and were not payable to the order of the
Chapter 25 Creation and Negotiation
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payee or to the payee or its order and were thus not negotiable instruments. Since the notes were not nego-tiable, the transfer by the Nursery to plaintiff must be deemed an assignment, and the assignee (plaintiff) stood in the shoes of the assignor and took subject to existing equities and defenses.
Affirmed.
Case Concepts for Discussion 1. Why did Andersen sign promissory notes in favor of Great Lakes Nursery? 2. What did Great Lakes do with these notes?

1. Why does the court allow Andersen to assert the defense of Great Lakes’ nonperformance when First Investment sued to collect the note?
2. What words are missing from these notes that would have changed the result of this case?
   25.2a Order Paper If the terms of an instrument provide that it is payable to the order or assigns a person who is
   VI 1 nor t) i 1 ill

Please refer to your text hooky, reference hooks and the interne, to write the answers. Quote references wherever necessary.
Imagine yourself starting sour msn business. Raced on ss hat ■ ou learned in an introduction to management course sou are requested to answer in details the follo,lintt questions:
Rriefl■ clarify ss hat the business is, where it will be located, ss hat it Is ill pros ide to the market in terms of goods or services.
N% hat kind of managerial functions ■ ou will use to run ■ our business and hors”
clarif■ boss many levels of management ■ ou might need and why?
What are management skills do you think would be most important for your business managers to have? Why?
!loss might the follo■sing management theories/approaches be useful to your business: scientific management, behavior approach and systems approach?

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