When an instrument fails to meet the technical requirements necessary to qualify as a negotiable instrument, which of the following statements is true?

A) The instrument is still enforced as a negotiable instrument if it has been transferred to a holder in due course.
B) The instrument is still enforced as a negotiable instrument if it has been accepted by a bank.
C) The instrument is still enforced as a negotiable instrument if the holder can establish detrimental reliance based on a reasonable belief that the instrument qualified as a negotiable instrument.
D) The instrument may qualify as an enforceable contract.
E) The instrument is null and void and of no use to the holder.

Question

Mwaniki Mwangi · Accepted Answer

Final Answer : D, Explanation :  An instrument that fails to meet the technical requirements for negotiability may still be enforced as a contract if the parties involved intended to enter into a contract and the instrument meets the general requirements for contract enforceability. Negotiability adds specific rights and protections, but the absence of negotiability does not automatically invalidate the underlying agreement.

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