Why does it matter whether or not a note is a negotiable instrument?

Question

I am aware that it determines its validiness. But I need other reasons why?

Answer 1

OK a note is not a check. negotiable instruments are governed by art 3, mostly adopted in one form or another in every state. a check is called a 'draft' which is an unconditional ORDER by the person writing it to the bank to pay the person it is made to. a note is an unconditional PROMISE to pay (as in a debt paid back). it is made by one person directly to another.
the unconditionality requirement is subject to certain exceptions (e.g, maturity date).
both these instruments, if they meet the art 3 criteria, are governed by your state's art 3 statutory law (also art 4 in case of checks).
if you have a promissory note that does not comply with these requirements (e.g., conditional promise to pay), then the note can be enforceable nonetheless under your state's common contract law, BUT it is not negotiable. That seems to be the point Richard is making that the art 3 law makes it easy to endorse and assign one person's rights to another, and also gives the holder the right to go after anyone endorsing in general. although you have to meet certain criteria before you go after each person in the endorsement chain. for example, when you endorse a check written to you, under article 3 law, you are making a promise to pay the holder PROVIDED that first the bank and then the person writing the check (the drawer and drawee) fail to make good on it.
this law facilitates uniform rules of commercial and other transactions

Answer 2

It doesn't matter to the *first* person it's given to.

If you give me a promissory note (not a negotiable instrument) I'm generally the only one who can take legal action against you for recovery if you don't pay.

If you give me a check (a negotiable instrument) and I cash it then the person who cashes it for me (called a successor in title) can pursue either me OR you (or both of us) for recovery if he deposits it in his bank and it bounces.

Richard

Answer 3

otherwise it has no enforcability.