Question

ABC Credit Co. has in its possession an undated note which provides that it is payable six months after the date on which it was issued. The note was issued on March 10, 2019, by Martin to Newman in payment for the sale of cooking utensils to Martin. On March 20, 2019, Newman indorsed the note and transferred it to ABC in payment of a debt owed by Newman to ABC. ABC sued Martin when Martin refused to make payment on the note. Martin’s defense raised the issue of whether the note was negotiable. Is the note negotiable?

Answer 1

The law is explicit clear that Bills of Exchange, Promissory Notes, Cheques and all other payment instruments are negotiable unless these are made Not Negotiable by the issuing party. Whether dated or undated will not affect the rights of party to endorse it to others, unless it was time barred.

Hence in the given case,the note was issued on March 10, 2019 in favour of Newman and which was further endorsed by Newman in favour of ABC on March 20, 2019. It was endorsed within the period of 6 Months and hence was not time barred. Newman was within its rights to endorse the Note.

The note was negotiable and thus ABC can raise a claim on Martin when Martin refused to make payment on the note. Martin's Defense would hence not succeed in their claim of Negotiability of the Note.