Renee had canceled the debt and renounced all rights against Justin and that Larry had notice of this fact. Has the debt been properly canceled? Explain.
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On June 15, 2012, Justin, for consideration, executed a negotiable promissory note for $10,000, payable to Renee on or before June 15, 2017. Justin subsequently suffered financial reverses. In January 2017, Renee on two occasions told Justin that she knew he was having a difficult time; that she, Renee, did not need the money; and that the debt should be considered completely canceled with no other act or payment being required. These conversations were witnessed by three persons, including Larry. On March 15, 2017, Renee changed her mind and indorsed the note for value to Larry. The note was not paid by June 15, 2017, and Larry sued Justin for the amount of the note. Justin defended upon the ground that Renee had canceled the debt and renounced all rights against Justin and that Larry had notice of this fact. Has the debt been properly canceled? Explain. |
Explanation
The instrument in the contract between Individual J and Individual R was cancelled orally, which is not considered as a legal cancellation of the instrument. So, Individual L, to whom Individual R endorsed the instrument, is not going to be liable for the payment against the note and the payment is going to have to be made by Individual J to Individual R.
Verified Answer
For the instrument to be considered as cancelled, (a) the instrument must be destroyed, (b) it should be written to-be-cancelled on the instrument itself, or (c) it should be surrendered to the party who is made free from the payment. But the instrument that was written by Individual J was cancelled orally by Individual R, which is not considered to be legally cancelled.
