ALTERNATE CASE PROBLEM ANSWERS
CHAPTER 25
NEGOTIABLE INSTRUMENTS
25-1A. Bearer instruments
The court held that lottery tickets were not governed by the UCC but by the state lottery statute,
which applied even though the UCC applies to commercial transactions in general. Because
the lottery statute required that presentment of the winning ticket was a condition precedent to
25-2A. Requirements for negotiation
This case was decided under the unrevised Article 3, but the result under the revised Article 3
would likely be the same. The court held that the note was not negotiable. The court pointed
out that UCC 3–105(2) of the unrevised Article 3 (UCC 3–106(a) of the revised Article 3)
25-3A. Requirements for negotiation
This case was decided under the unrevised Article 3, but the result under the revised Article 3
would be the same. The court held that the notes were negotiable. The court explained that the
unrevised UCC 3–106 “does not explicitly mention variable rate notes (‘VRNs’) because when
the U.C.C. was developed in the 1950s and adopted in the 1960s, VRNs were virtually
unknown. The necessity for VRNs came about as a result of the volatile financial markets of the
late 1970s. By the mid-1980s, VRNs accounted for 60% of the total loans made in this country.
That dominance in the financial markets has continued into the 1990s.” The court noted that
“[t]he majority of courts which have addressed the issue before us have declined to hold that
notes which contain variable interest rates are negotiable instruments.” But “the better
25-4A. Undated instruments
No. The appellate court held that the note was nonnegotiable because although a time in-
25-5A. Requirements for negotiation
No. The court granted the FDIC’s motion for summary judgment. The court pointed out that “[t]o
APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 25 B-3
25-6A. Negotiable versus nonnegotiable instruments
If the instrument was a bearer instrument, then Broadway’s possession qualified it as a holder.
If it was an order instrument, wherein a specifically named payee must be determined upon the
25-7A. Negotiability
Regent filed a motion for summary judgment, which the court granted. The court found that each
draft declared on its face that it was payable a specified number of days after the bill of lading
date, which was on another writing. For this reason, the drafts were nonnegotiable instruments.
On appeal, a state intermediate appellate court reversed this part of the judgment. The court
3–114 indicates that words control figures unless the words are ambiguous, and handwritten
terms control typewritten and printed terms, and typewritten control printed. The question here
was whether handwritten figures control printing. The court explained that “the purposes of the
U.C.C. are best served by considering an amount imprinted by a checkwriting machine as
‘words’ for the purpose of resolving an ambiguity between that amount and an amount entered
B-4 APPENDIX B: ALTERNATE CASE PROBLEM ANSWERS—CHAPTER 25
amount and an amount entered upon the line usually used to express the amount in figures.”
25-9A. Fixed amount of money
The Texas state trial court ruled in favor of Remington on this issue, but the Court of Appeals of
Texas (Dallas) reversed. The appellate court held, among other things, that the note did not
25-10A. Negotiability
The court issued a judgment in favor of Babcock and Honest Air, based in part on a deter-
mination that the RISC was a negotiable instrument. GMAC appealed to a state intermediate
appellate court, which concluded that the RISC was not a negotiable instrument. The appellate
court pointed out that under the UCC, to be negotiable an instrument must contain “an
unconditional promise or order to pay.” Its payment cannot be conditioned on the occurrence or