What Is a Negotiable Instrument?
A negotiable instrument is a signed written document that promises or orders the payment of a fixed amount of money and can be transferred from one person to another. Checks, promissory notes, and drafts are the everyday examples. Their defining feature is "negotiability" — the ability to be passed along so that a later good-faith holder can acquire strong rights to payment.
Requirements Under the UCC
Negotiable instruments are governed by Article 3 of the Uniform Commercial Code, adopted in Florida as Chapter 673, Florida Statutes. To be negotiable, an instrument generally must be a written, signed, unconditional promise or order to pay a fixed amount, payable on demand or at a definite time, and payable to order or to bearer.
Holder in Due Course
- A person who takes the instrument for value, in good faith, and without notice of problems may be a holder in due course
- A holder in due course takes the instrument free of most defenses the original parties could have raised
- This protection is what makes negotiable instruments function smoothly in commerce
Related Terms
- Promissory Note — A common negotiable instrument
- Consideration — Value given for an instrument
- Mortgage — Often secures a negotiable promissory note
Barnes Walker
Barnes Walker's attorneys handle promissory notes, loan documents, and commercial-paper disputes for Florida businesses and lenders. Request a legal inquiry for assistance.
Florida Law Reference
Fla. Stat. Ch. 673 (UCC Article 3)
Florida’s enactment of UCC Article 3 governs negotiable instruments — their requirements, negotiation, and the rights of a holder in due course.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC