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  1. #1
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    Default Are Student Loan Contracts Negotiable Instruments

    My question involves collection proceedings in the State of: California

    Good afternoon.
    I have a private student loan. After reading the contract it says it is NOT governed by article 3 of the UCC but is governed by article 9 of the UCC. Article 3 deals with negotiable instruments. Does that mean my student loan contract isnt a negotiable instrument? Im confused please help thanks

  2. #2
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    Default Re: Ucc Article 3 Negotiable Instruments

    Apparently it is considered a secured transaction since chap 9 deals with secured transactions:

    http://www.law.cornell.edu/ucc/9/article9

    why would you think your loan is a negotiable instrument? While the underlying paper may be treated as a negotiable instrument, as far as you are concerned, it is not a negotiable instrument.

    (a) Except as provided in subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:
    (1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder;
    (2) is payable on demand or at a definite time; and
    (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but thepromise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor.
    a check is a negotiable instrument. A loan to you is not a negotiable instrument.

  3. #3
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    Default Re: Ucc Article 3 Negotiable Instruments

    thank u for your prompt response. I thought it was a negotiable instrument because i thought all student loan "promise notes" or contracts are considered negotiable instruments here in california.
    Based on a law suit i read TERI VS YOKOYAMA. But when i actually read the fine print "NOT governed by Article 3 of the UCC" i was confused

  4. #4
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    Default Re: Ucc Article 3 Negotiable Instruments

    UCC is federal law. The state does have a version of the UCC which would be the California Commercial Code. Given the reference to chapters in your question, I would say they are speaking to federal law. The case you cited is state law.

    but you said you have a loan. Now you speak of promissory notes. Two often intertwined issues but not necessarily the same thing.

    but anyway, for even a promissory note to be a negotiable instrument, it must be unconditional and able to be sold by the holder. I do not know the terms of your promissory note so I could not say whether it fulfills the obligations required to be a negotiable instrument.

  5. #5
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    Default Re: Ucc Article 3 Negotiable Instruments

    A technical point: The UCC is not federal law. It's a uniform code, adopted by the states. As a uniform code, there are few changes in the law as adopted by the various states.

  6. #6
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    Default Re: Ucc Article 3 Negotiable Instruments

    Depending upon the source of the loan, it might be impossible to classify the promissory note as a negotiable instrument. Student loans from the U.S. Department of Education, for example, are subject to federal regulations governing their collection. These additional requirements exclude the possibility of negotiability. I doubt that a good faith purchaser for value without knowledge of defects in the original student loan could take most student loans free of the defects. A note on a loan from a commercial lender, that is not government insured, could possibly be a negotiable instrument, but it is impossible to classify all student loans into one single category. There are many different types of student loans, from many different source.

  7. #7
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    Default Re: Ucc Article 3 Negotiable Instruments

    Quote Quoting jk
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    UCC is federal law. The state does have a version of the UCC which would be the California Commercial Code. Given the reference to chapters in your question, I would say they are speaking to federal law. The case you cited is state law.
    The UCC is not a federal law, but a product of the National Conference of Commissioners on Uniform State Laws and the American Law Institute. It is a framework only, a recommendation of the laws that should be adopted in the states. The UCC itself is a product of private organizations. Article 9, dealing primarily with transactions in which personal property is used as security for a loan or extension of credit, has been enacted in all states.

  8. #8
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    Default Re: Ucc Article 3 Negotiable Instruments

    Quote Quoting Bubba Jimmy
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    The UCC is not a federal law, but a product of the National Conference of Commissioners on Uniform State Laws and the American Law Institute. It is a framework only, a recommendation of the laws that should be adopted in the states. The UCC itself is a product of private organizations. Article 9, dealing primarily with transactions in which personal property is used as security for a loan or extension of credit, has been enacted in all states.
    so, I guess you didn't read Mr. K's post or you simply had some overwhelming need to post the same thing he did or what?


    that still does not change the fact the OP cited the UCC and by posting what you did, you actually supported my statement that the UCC does not control the matter. The CCC would and while it is likely the CCC mirrors the UCC very closely, if not simply verbatim copy, it is meaningless to argue the UCC states anything since it is not enforceable law.

  9. #9
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    Default Re: Ucc Article 3 Negotiable Instruments

    Quote Quoting jk
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    so, I guess you didn't read Mr. K's post or you simply had some overwhelming need to post the same thing he did or what?

    It is called elaborating on a point by providing more detailed information. For example, I did point out that Article 9, which you posted a link to, has been enacted at the state level in all states. If you find the things I post to be annoying feel free to ignore me. Meanwhile, I'll post comments as I see fit.

    If it is meaningless to speak of the UCC stating something, why are entire courses in law schools dedicated to studying the UCC?

  10. #10
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    Default Re: Ucc Article 3 Negotiable Instruments

    Unless all states have enacted Artlicle 9, verbatim as written in the UCC not all states have enacted Article 9 but a variation of it. So, have all states enacted Article 9 verbatim? You go ahead and check that out so you can know if your statement is correct or not.

    Regardless, you provided no details of value but simply attempted to attack me.




    If it is meaningless to speak of the UCC stating something, why are entire courses in law schools dedicated to studying the UCC?
    Why do you think it is meaningless to speak of the UCC stating something? As usual, you want to take one of my statements, edit it to remove context, and attempt to argue with it.


    Here is the statement:

    The CCC would and while it is likely the CCC mirrors the UCC very closely, if not simply verbatim copy, it is meaningless to argue the UCC states anything since it is not enforceable law.
    Where did I say that it is meaningless in whole such as your statement implies?

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