Business Law 13th Edition by Frank Cross, Kenneth Clarkson, Roger LeRoy Miller

Exercise 16

Requirements for Negotiability. Peter Gowin was an employee of a granite countertop business owned by Joann Stathis. In November 2015, Gowin signed a promissory note agreeing to pay $12,500 in order to become a co-owner of the business. The note was dated January 15, 2015 (ten months before it was signed) and required him to make installment payments starting in February 2015. Stathis told Gowin not to worry about the note and never requested any payments. Gowin continued to work at the business until 2017, when he quit, claiming that he owned half of the business. Stathis argued that Gowin was not a co-owner because he had never paid the $12,500 into the business. (See page 481.)
(a) The first group will formulate an argument in favor of Stathis that Gowin did not own any interest in the business because he had never paid the $12,500.
(b) The second group will evaluate the strength of Gowin's argument. Gowin claimed that because compliance with the stated dates was impossible, the note effectively did not state a date for its payment and therefore was a demand note under UCC 3-108(a). Because no demand for payment had been made, Gowin argued that his obligation to pay had not arisen and the termination of his ownership interest in the granite business was improper.