What are Negotiable Instruments? 

During these trying times, many Americans may find themselves in need of extra cash. However, it may be more complicated than it seems. Investopedia states that a negotiable instrument is a signed document that promises a sum of payment to a specific person. They are transferable and allow the holder to take funds as cash or in any manner, they see fit. In other words, it provides a safety net for the lender to ensure they are paid back.

Negotiable instruments can be transferred from one person to another. Once fulfilled, the full legal title will be obtained by the payer. The purpose of these instruments is to democratize and streamline financial transfers responsibly.

Furthermore, the UCC  (1) defines a negotiable instrument as piece of paper that contains “an unconditional writing that promises or orders the payment of a fixed amount of money.” A negotiable instrument can be in the form of a check, money order, traveler’s check, a promissory note, bill of exchange, drafts, and certificates of deposit, among others. These documents must guarantee cash payments either on-demand or at a future time from the date of exchange.


When will you need a negotiable instrument? 

 Negotiable instruments can provide necessary assistance to borrowers. Many times, borrowers are short on capital and need a boost to continue their livelihood and dreams. Negotiable instruments provide a safety net for lenders and financial life for borrowers. Here are some examples of when you may need a negotiable instrument:

  • Continuing education for school and need tuition loans.
  • Buying or renting a home
  • Buying or leasing a vehicle
  • Applying for a credit card
  • Applying for a line of credit at a cell phone carrier
  • Applying for a tax installment agreement with the IRS.

Negotiable instruments serve as an essential component to functions in the financial industry. Many deals in finance require negotiable instruments to initiate. Those who need capital for their needs will likely participate in negotiable instruments at some point or another.


What are some basic requirements of a negotiable instrument? 

For a document to be considered a negotiable instrument, some requirements include:

  • The instrument must be in writing.
  • The instrument must be signed by the maker or drawer.
  • The instrument must be an unconditional promise or order to pay.
  • The instrument must be for a fixed amount in money.
  • The instrument must be payable on demand or at a definite time.
  • The instrument must be payable to order or bearer unless it is a check.

Each state may vary in its requirements, contact an attorney to understand your requirements and options. Contact an attorney today to discuss your options.


Florida Promissory Note Requirements

Promissory notes are a necessary step in negotiable instruments. Under Florida law, promissory notes are one of the most prominent examples of a negotiable instrument. They are standard practice in business dealings that involve installment payments, typically every month.

A promissory note is meant to borrow money in a useful instrument for financial and business transactions and functions. In the State of Florida, there are many rights that the lender and borrower are entitled to. Some details that must be made clear for both parties include:

  • The amount of the loan (Principal sum)
  • Interest rate and how it accumulates over time (per annum)
  • Due dates of both the installment payment and the full repayment date
  • Late fees in the event of nonpayment and/or late payments.
  • Mailing address for the borrower and mailing address for the lender

Florida statute mainly prevents predatory lending practices from lenders and financial providers. For example, for loans under $500,000, the rate of interest cannot exceed 18 percent per year. The State of Florida can also tax 35 cents up for every $100, which may total up to an amount of $2,540.

Promissory notes can be personal agreements with family, friends, and acquaintances for expenses or assistance. More commonly, promissory notes can also be commercial. These types are more sophisticated and used for business dealings. Sometimes, promissory notes may come with security agreements, asset purchase agreements, non-disclosure agreements, among others.

Our legal professionals can help specify details of your negotiable instrument.


Most common uses for promissory notes in a negotiable instrument. 

As briefly stated above, a negotiable instrument intends to gain some commercial common ground. Promissory notes are typically used for the following business transactions:

  • Financing the purchase of real estateproperty
  • Automotive purchases and leases
  • Business loans (funds to start or continue operation of a commercial venture)
  • Student loans (funds to start or continue education at a higher-level institution)
  • Investments (funds to support a corporation or stock)
  • Raising capital (in this case, the lender may loan funds to a business and receive an ownership interest in addition to repayment of the loan as consideration)


What happens if your negotiable instrument becomes overdue? 

According to The Business Professor (2), when the agreements of a negotiable instrument are not meant, it becomes overdue. Some examples of the negotiable instrument becoming overdue include:

  • When a maker or drawee refuses to honor the agreement.
  • When less than the minimum amount is paid
  • When no payment has been made in 90 days or more.


Furthermore, an instrument is overdue as soon as the day after a payment due date is not meant. If the instrument requires presentment for payment, the instrument would be overdue the day after the demand for payment is made.

Many instruments also have clauses for future payments once it defaults. This can result in accelerated due dates and higher minimum payments.  If the note has a clause calling for an acceleration of all future payments upon default (such as becoming overdue), the document is overdue after the day established as the accelerated due date.


Our legal team can help you identify discrepancies in your negotiable instrument

In trying times, it is important to receive the help you need. However, it is equally important to understand the fine print of and to ensure that you are getting involved in a favorable transaction. Contact Cueto Law Group today for your free consultation!



  1. https://www.nolo.com/legal-encyclopedia/the-ucc-negotiable-instruments-part-1-2.html
  2. https://thebusinessprofessor.com/en_US/122296-law-transactions-amp-risk-management-commercial-law-contract-payments-security-interests-amp-bankruptcy/overdue-payment-of-negotiable-instrument
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