The accounting department of Delta Sales Company receives an instrument that states, "March 16, 2011. Thirty days after date, I promise to pay to the order of cash, $700 (seven hundred and 00/100 dollars), in Denver, Colorado, with interest at the rate of 7% (seven percent) per year. This instrument is secured by a contract for the sale of a computer. Due April 15, 2011. [Signed] Edward Jones." What type of instrument is this? Is it negotiable? If not, why not?

Question

What will be an ideal response?

Answer 1

This instrument is a promissory note and a bearer note, and it is negotiable. A promissory note is an instrument with two parties: a maker and a payee. The maker of this note is Edward Jones. The payee is "cash." A note that is payable to "cash" is a bearer note. To be negotiable, an instrument must be in writing, signed by the maker or drawer, an unconditional promise or order to pay, state a fixed amount of money, payable on demand or at a definite time, and payable to order or to bearer (unless it is a check). This instrument meets all of these requirements. The notation on the instrument that it "is secured by a contract for the sale of a computer" is not a condition for payment and does not otherwise affect the negotiability of the instrument.