XYZ audio purchased a few audio components from Swift Sounds. The high-quality audio components were to be used by XYZ in a highly expensive customized sound system that will be sold to its customers. Swift fraudulently replaced a large number of reconditioned audio parts for new ones that XYZ was shown and believed he purchased. In payment for the purchase, XYZ executed and delivered the following instrument to Swift:
January 9, 2019
“For Value Received, XYZ Audio promises to pay Four Thousand Dollars ($4,000) to the order of Swift Sounds, on February 1, 2019.
Note: payment shall be made only subject to receiving proceeds from the resale of the audio components this day purchased from Samuels Sounds and used as major components in the customized sound systems sold to our customers.”
/s/ Harry Smith, XYZ Audio
On February 2nd, Swift Sounds transferred the instrument to Grande for $5,550 by signing his name (/s/ Swift Sounds) on the back of the instrument and delivering it to Grande. Grande had no knowledge of the fraudulent replacement of the audio components by Swift Sounds. On February 10th, Grande showed the instrument to XYZ Audio for payment. XYZ refused to pay for the instrument. Subsequently, XYZ stated that all the audio components were returned back to Swift Sounds immediately upon discovery of the facts. Grande commenced legal action against XYZ on the instrument.
A. Is this a negotiable instrument? Explain.
B. Assuming that it is a negotiable instrument, will Grande be successful against XYZ Judgment for Whom? Explain.