Law Essay

Business Law: IRAC Analysis
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Business Law: IRAC Analysis
Issue: The case study is about a negotiable note issued by Fred payable to Conglomerate, Inc. for the purchase of a tractor. Before the maturity of the note, Conglomerate negotiated it to the We Get Results Finance Company who in turn negotiated the same note to the ASPCA for charity. However, when the due date comes, Fred refuses to pay the ASPCA citing defectiveness of the tractor bought from Conglomerate. Therefore, the main issue in the case is to determine who is liable for payment on the instrument to the ASPCA.
Rule: According to the Uniform Commercial Code under Article 3, negotiable instruments are unique in that they have the ability to transfer the right of payment from one person to another without consideration of the prior person who held the instrument (Legal Information Institute, 2018). Therefore, one is mandated to pay the current holder of the negotiable instrument and not the prior owner who possessed the document. However, the amendment UCC 3-602 stipulates that “the person required to pay should be notified of the transfer of rights of the negotiable instrument” (Legal Information Institute, 2018). Failure to do this means that the negotiable document cannot be enforced and the debtor is not liable to pay.
Analysis: In view of the rule of negotiable instrument, ordinarily Fred’s promise to pay Conglomerate, Inc. is not dependent on the outcome of the tractor purchased.

As a result, the inclusion of defective gears in the tractor does not affect the initial agreement between Fred and Conglomerate Inc. Consequently, Fred is expected to honor the agreement as per the negotiable note and pay ASPCA since negotiable instrument allows transferability of payment rights. However, Conglomerate Inc. did not notify Fred, We Get Results Finance Company or ASPCA of the transfer of payment rights. This breaches the amendment UCC 3-602 and makes Fred not liable to pay.
Conclusion: Although ASPCA is the current bearer of the negotiable note document, the instrument is bound under pay after notification of transfer of rights. Therefore, Conglomerate, Inc is the one liable for payment on the instrument to the ASPCA.
Reference
BIBLIOGRAPHY l 1033 Legal Information Institute. (2018). U.C.C. – Article 3 – Negotiable instruments (2002). Retrieved from Cornell law school: https://www.law.cornell.edu/ucc/3