Negotiable Instrument - General Rules of Interpretation
How Does a Court Interpret the Provisions of a Negotiable Instrument?
Written by Jason Gordon
Updated at September 26th, 2021
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Table of Contents
What rules does the court apply when determining negotiability?Discussion QuestionPractice QuestionAcademic ResearchWhat rules does the court apply when determining negotiability?
The UCC favors negotiability of commercial instruments. It contains a number of rules to resolve any uncertainty as to the terms of the instrument and to supply missing terms. The following rules apply to situations where terms in a negotiable instrument contradict each other:
- words take precedent over numbers;
- handwritten terms prevail over typed and printed terms; and
- typed terms win over printed or boiler-plate terms.
These rules can allow for any number of general assumptions about the intent and obligations of the parties.
Example: If the applicable interest rate of a promissory note is left off, courts hold that a judgment rate applies.
Next Article: How is a Negotiable Instrument Negotiated Back to: COMMERCIAL PAPER LAW
Related Topics
- Negotiable Instrument
- What is Negotiability and why is it important?
- What is required for commercial paper to be negotiable?
- Sum Certain (Contracts)
- Inflation Adjustment Clause
- When does commercial paper contain an Unconditional promise to pay?
- Backup Line of Credit
- What is Payable on Demand or Payable on Time?
- What is Order Paper and Bearer Paper?
- Bearer Form
- How is a payee identified on the negotiable instrument?
- What rules does the court apply in determining negotiability?
Discussion Question
How do you feel about these generally applicable rules of interpretation for negotiable instruments? Is there any argument against the application of these rules?
Practice Question
Hank drafts a check to Ira that is drawn on First Bank. When Ira presents the check for payment, she realizes that the check indicates Five-hundred dollars and 5,000.00 in the amount column. What is the likely interpretation of First Banks obligation to accept and pay the check?