Negotiable Instruments
Written promises or orders to pay, such as notes and drafts, governed by UCC Article 3.
REG loves to split negotiability from holder-in-due-course (HDC) status: negotiability is judged from the instrument’s face (the “courier without luggage” carries no extra promises, payable to order or bearer, signed), while HDC asks whether the transferee took it for value, in good faith, and without notice of any defense, claim, or that it was overdue. The classic trap is the personal vs. real defense split: an HDC defeats personal defenses (breach, fraud in the inducement, failure of consideration, non-delivery) but never the real defenses—forgery, fraud in the execution, infancy, material alteration, and discharge in bankruptcy, plus incapacity, illegality, or duress that makes the obligation void (mnemonics like “FAIDS” list these flatly, but they’re real only when they nullify the obligation).
Don’t confuse this with UCC Article 2 (Sales) or general contract rules—Article 3 governs the paper, not the underlying deal, so an HDC collects even if the goods were defective. Watch order-vs-bearer: order paper negotiates by indorsement plus delivery; bearer paper by delivery alone. A blank indorsement turns order paper into bearer paper.
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