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The casual observer of the legal academy would assume that negotiability is a legal principle of foundational importance to our nation's payment and credit systems. All of the obvious indicators support that assumption. Among other things, the 1980s witnessed a major effort by the American Law Institute and the National Conference of Commissioners on Uniform State Laws to update and revise the relevant provisions of the Uniform Commercial Code. Similarly, negotiability continues to occupy a safe position in law school curricula, as prominent academics at our most elite schools continue to write casebooks focusing on negotiability. Most recently, for example, Clayton Gillette, Alan Schwartz, and Bob Scott have published a prominent new casebook on Payment Systems and Credit Instruments, which presents a course organized around a detailed discussion of negotiability and its consequences. And Gillette, Schwartz, and Scott are not outliers. They are working in the heartland of academic attention: This decade has produced several other major casebooks for courses with a similar focus on the principles of negotiability, as well as a number of treatises and related works that offer detailed doctrinal analyses of negotiability.

But it would be wrong to accept those indicators. At least in the payment and credit contexts (the subjects on which academics have focused their analysis of negotiability), negotiability is an outmoded and decaying relic. Moreover, even in the checking system – the most significant context where negotiable instruments survive – legal and practical developments have rendered principles of negotiability all but irrelevant to the operation of the system. To be sure, I am not the first to bear witness to the declining role of negotiability. A few previous scholars, most notably Jim Rogers, have noticed some aspects of the decline in the doctrinal significance of the rules of negotiability. Others have speculated as to the limited use of negotiable instruments in modem commerce. But those limited efforts have done little or nothing to dispel the general impression that negotiability remains significant. Certainly, negotiability must be important in some context or so many people would not be devoting so much time to industrious examination and explanation of the system. Right?


Banking and Finance Law | Business Organizations Law | Law


This article was originally published in UCLA Law Review.