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Rule against Additional Terms

Learn about the rule that, for an instrument to be negotiable, it generally must contain no instruction or undertaking by the person ordering or promising payment except a promise or order to pay money.


In this lesson, we’ll explore the fourth and final negotiability requirement – the rule against additional terms.

I. Rule against Additional Terms

Imagine a winery borrowed $2 million from a bank to build a new wedding venue on its property. The winery executed a promissory note promising to repay the $2 million to the bank by a specified time. The note also contained a clause requiring the winery to maintain a particular minimum working capital – that is, a minimum ratio of current liquid...