Chapter 25 - Honest Air Conditioning & Heating, Inc. Case

In 2001, Cory Babcock and Honest Air Conditioning & Heating, Inc., bought a new Chevrolet Corvette from Cox Chevrolet. Their retail installment sales contract (RISC) required monthly payments until $52,516.20 was paid. The RISC imposed many other conditions on the buyers and seller with respect to the payment for, and handling of, the Corvette.

Cox assigned the RISC to General Motors Acceptance Corp. (GMAC). In 2002, the buyers sold the car to Florida Auto Brokers, which agreed to pay the balance due on the RISC. The check to GMAC for this amount was dishonored for insufficient funds, however, after the vehicles title had been forwarded.

GMAC filed a suit in a Florida state court against Honest Air and Babcock, seeking $35,815.26 as damages for breach of contract. The defendants argued that the RISC was a negotiable instrument. A ruling in their favor on this point would reduce any damages due GMAC to less than the Corvettes current value.

What are the requirements for an instrument to be negotiable? Does the RISC qualify? Explain.