This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If an instrument for the payment of money contains a provision to the effect that a discount will be given in case such instrument is paid before maturity, or in case it is paid promptly, the weight of authority seems to be in favor of the view that such provision renders the instrument non-negotiable, since it is impossible to tell what amount will discharge such instrument.1 It will be seen from the cases cited in support of this proposition the rule has been applied where the discount agreed upon was for a fixed sum or a fixed percentage, so that the amount to be paid could be determined exactly at the time that the payment was made or tendered. No reason has been suggested for treating a provision for a discount differently from a provision for an increased rate of interest after maturity or a provision for a reduction in the rate of interest in case of payment at maturity; and such provisions are generally held not to prevent the instrument from being negotiable.2 There is, accordingly, some authority for holding that if the discount is for a definite sum, such provision does not render the instrument non-negotiable,3 although such a provision would render the instrument non-negotiable if the amount of the discount were not fixed by the terms of the contract.
2 Smith v. Marland, 59 Ia. 645, 13 N. W. 852.
3 Roblee v. Bank. 69 Neb. 180. 95 N. W. 61.
1 Way v. Smith, 111 Mass. 523.
So of a provision, "This note to be discounted at 12 per cent., if paid before maturity." National Bank v. Feeney, 9 S. D. 550, 46 L. R. A. 732, 70 N. W. 874 [affirmed on rehearing, 11 S. D. 109, 75 N. W. 896; affirmed en second rehearing, 12 S. D. 156, 76 .\m. St. Rep. 594. 80 N. W. 186].
so of a provision for a discount of six per cent, if paid within fifteen days. Farmers' Loan & Trust Co. v. McCoy & Spivey Bros., 32 Okla. 277, 40 L. R. A. (N.S.) 177, 122 Pac. 125; First National Bank v. Watson, 56 Okla. 495, 155 Pac. 1152.
So of a provision for a discount of six per cent, if paid at maturity. Lambert v. Harrison, - Okla. - , 171 Pac. 45.
2 See Sec. 2321.
3 Loring v. Anderson, 95 Minn. 101, 103 N. W. 722.