Introduction
Financial transactions are carried out daily between different individuals or organizations using various means of payment. Negotiable instruments are used as means of payments given that these instruments are easily transferable between individuals or organizations. There are several types of negotiable instruments including the most common types such as cheques, promissory notes and bills of exchange. A promissory note is an undertaking that is unconditional and endorsed in writing to pay a certain amount of money or order to pay the bearer of the note.
Overview
The scenario presented in this case shows a promissory note which has been transferred between different individuals. A promissory note is a legally recognized document that is drawn by an individual or organization to another party. The promise to pay should be time-bound and unconditional. In the scenario presented by this case, Alberta Alpha drew a promissory note and issued it to Bob Bravura when transferred the note to several parties before the note ended up with Dan Delta. However, the case is engaging in that the drawer of the note (Alpha) filed for bankruptcy while all his debts were already discharged leading to dishonoring of the promissory note (White, 2010). A promissory note is a negotiable instrument that is not conditional according to the Uniform Commercial Code (UCC) Section 403. A promissory note is payable to the bearer upon the lapse of the time set out in the promissory note. As a result, Dan has a right to claim for payment from Alpha who is the drawer of the note. Due to the nature of the law, if any condition alters a promissory note then the promissory note ends up being null and void. This is similar to an earlier case Ramesh vs. Khan [1981], whereby Khan drew a promissory note that stated Ramesh would be paid if he married Khan’s sister (Tepper, 2011). The promissory note could be enforced since it was conditional and thus, it breached the law.
According to the provisions of the UCC, Dan has a right to enforce the promissory note against Alpha since section 403.106 recognizes him as the bearer of the note. The promissory note was transferred to Dan by Carty, and since Dan had no information that the instrument had been discharged following the bankruptcy proceeding filed against Alpha. Therefore, Section 403.106 states that Dan being the bearer of the note has the right to enforce the promissory note. Dan has a right to claim for payment against Alpha based on section 403.305 of the UCC. This section states that a bearer of a promissory note has the right to enforce an instrument even if the drawer is facing an insolvency proceeding. Section 403.306 states that any person has a right to proceeds from a promissory note or rescind the negotiation to recover proceeds of an instrument (White, 2010). Using the above provisions, Dan could claim his rights to held Alpha liable for to payment of the promissory note in his possession.
Conclusion
Negotiable instruments such as promissory notes are defined under civil law using common laws such as the Uniform Commercial Code. In a setting whereby two or more parties are involved in the use and transfer of negotiable instruments as witnessed in Dan’s case, proper interpretation of the law is necessary. Based on sections 403.106 and 403.305, Dan has all rights to claim for the enforcement of promissory notes and honoring of the same by the Drawer.
References
Tepper, P. (2011). The Law of Contracts and the Uniform Commercial Code. Boston, MA: Cengage Publishing. Print.
White, J. & Summers, R. (2010). Uniform commercial code. Chicago, IL: John Wiley and Sons. Print.