Certainty of the sum payable determinable from the language of the instrument itself, is essential to negotiability.
(1) In general
The instrument must be to pay money which is certain in amount and the certainty must appear from the instrument itself.
If a note is secured by a real estate mortgage which provides that the holder may pay taxes if unpaid by the mortgagor which would then become so much additional indebtedness, or contains similar provisions as to other expenditures, the negotiability of the note is not affected thereby.
"The note is given as evidence of the debt and to fix the terms and time of payment. It is usually complete in itself - a single, absolute obligation. The purpose of the "mortgage is simply to pledge certain property as security for the payment of the note." 26
(2) When sum held not uncertain.
"The sum payable is a sum certain within the meaning of this act, although it is to be paid: 1. With interest; or
25. Smith v. Myers, 207 111. 126.
26. Thorpe v. Mindeman, 123 Wis. 149, 68 L, R. A. 147.
2. By stated installments; or
3. By stated installments, with a provision that upon default in payment of any installment or of interest, the whole shall become due; or
4. With exchange, whether at a fixed rate or at the current rate; or
5. With costs of collection, or an attorney's fee, in case payment shall not be made at maturity."27
Example 16. A note (otherwise correctly drawn) was payable in two equal installments, with a provision that the whole amount should become payable upon default in the payment of the first installment. Contended that this made the note nonnegotiable. But, Held, the note is negotiable.28
Clauses of this sort are called "acceleration clauses" and if of the nature indicated do not destroy negotiability. But where the holder has a right to call on the maker to do something, as, for instance, to deliver more collateral, or otherwise the note will become mature, there is a difference of opinion, the weight of authority being that such provisions destroy negotiability.28a
The Negotiable Instruments Law in finding that a provision for exchange at a fixed rate or at a current rate establishes uniformity where before its adoption there has been difference of opinion. In many decisions the phrase "with current exchange" was deemed to make the amount uncertain and therefore to destroy the note's negotiability, inasmuch as the rate might vary. But
27. Nego. Instru. Act, SEC. 2.
28. Carlon v. Kenealy, 12 M. & W. (Eng.) 139.
28a. Holladay State Bk. v. Hoffman, 35 L. R. A. N. S. 390 and note; Nickell v. Bradshaw, 183 Pac. 13, at p. 17, with collection of authorities.
such a holding, while possibly consistent with the general theory that the amount must be a sum certain, ignores a convenient commercial practice. That it should be declared that such a provision shall not be deemed to make the amount uncertain is highly desirable. Such was hitherto the weight of authority,29 and such is now the statutory law.
A provision in an instrument for payment of "reasonable attorney's fees" for collecting the same is a stipulation which in many cases was held to make an instrument nonnegotiable. But the weight of authority was that such a provision was inoperative if the instrument was paid at maturity, and therefore did not destroy negotiability. The negotiable instruments law has adopted the viewpoint of this line of authority.
The instrument must be payable in money to be negotiable.
(1) In general.
To come under the operation of the negotiable instruments law, statutory or nonstatutory, an instrument must be one providing for payment in money.30 We have already seen how this requirement radically distinguishes negotiable instruments from negotiable documents of title. An instrument which calls for the payment of anything besides money may be a good contract or a good order, but falls without the class of negotiable paper, though perhaps drawn in the form thereof.
29. Hastings v. Thompson, 54 Minn. 184.
30. "Commercial paper shone as it were by reflected light, and derived its negotiable quantities [qualities?] from its similarity to the money in which it was payable. Hence it is that bills and notes payable in anything but money are not negotiable." Brown v. Perera, 176 N. Y. S. 215.
Example 17. A promise to pay to bearer a certain amount of "gold" is not negotiable.31
(2) To pay money and do something else.
A promise to pay money and to do something else is not negotiable.32 The obligation is entire and such an instrument cannot be rendered negotiable by ignoring the promise to do the additional act.
Example 18. A promise to pay money and deliver a horse, is not negotiable.33
(3) To pay money or do something else - debtor's option.
A promise or an order to pay money or something else at the option of the party liable is not negotiable.34
Example 19. A promise to pay to order a certain quantity of grain or a certain amount of money is not negotiable.35
(4) To pay money or do something else - holder's option.
A promise or order to pay money or to do something else at the option of the holder is (the note being otherwise correctly drawn) negotiable as a promise or order to pay money.
31. Roberts v. Smith, 58 Vt. 492.
32. Martin v. Chauntry, 2 Stra. (Eng.) 1271; Nego. Instru. Act, SEC. 5.
34. Matthews v. Houghton, 11 Me. 377.
Example 19a. A promise to pay a certain amount of money (the other requirements of the law being fulfilled) or to issue stock in the amount thereof, at the option of the holder, is negotiable.36
(5) What is money.
Payment to be made in "bank notes" is not payment in money and such notes are not negotiable.37
But it is no objection that paper "designates a particular kind of current money in which payment is to be made."38 as for instance, "United States Gold Coin" or foreign money ("Mexican dollars").40