1. (a) Except as provided in this section, for the purposes of subsection (a) of Section 3-104 of this title, a promise or order is unconditional unless it states (i) an express condition to payment, (ii) that the promise or order is subject to or governed by another record, or (iii) that rights or obligations with respect to the promise or order are stated in another record. A reference to another record does not of itself make the promise or order conditional.
2. (b) A promise or order is not made conditional (i) by a reference to another record for a statement of rights with respect to collateral, prepayment, or acceleration, or (ii) because payment is limited to resort to a particular fund or source.
3. (c) If a promise or order requires, as a condition to payment, a countersignature by a person whose specimen signature appears on the promise or order, the condition does not make the promise or order conditional for the purposes of subsection (a) of Section 3-104 of this title. If the person whose specimen signature appears on an instrument fails to countersign the instrument, the failure to countersign is a defense to the obligation of the issuer, but the failure does not prevent a transferee of the instrument from becoming a holder of the instrument.

4. (d) If a promise or order at the time it is issued or first comes into possession of a holder contains a statement, required by applicable statutory or administrative law, to the effect that the rights of a holder or transferee are subject to claims or defenses that the issuer could assert against the original payee, the promise or order is not thereby made conditional for the purposes of subsection (a) of Section 3-104 of this title; but if the promise or order is an instrument, there cannot be a holder in due course of the instrument.

   Oklahoma Code Comment

5. 1. Subsection 3-106(b)(i) generally continues prior law, including the principle announced in lames Talcott, Inc. v. Finley, 389 P.2d 988 (Okra. 1964). Talcott held that any reference to the terms of an extrinsic agreement in such a way as to make the instrument subject to the terms of that agreement destroys the negotiability of the instrument. Under subsection 3-106(b)(i), however, reference to an outside agreement for rights with respect to collateral, prepayment or maturity does not destroy negotiability. The problem is that the reference to an outside agreement may cross the line prohibited by the Talcott court. For example, if a note is to be coordinated with the events of default in a mortgage or a security agreement that secures the debt the note evidences, and the note states that it will be subject to or governed by the events of default in the security document, the reference goes too far and the line is crossed. But if the note provides that it will be due in full immediately if any payment is late or any event of default in the security document occurs, that is a permitted reference and the note is not subject to the other document. One merely must ascertain if an event of default in the security document has occurred, which is not different than the process one must use to determine if a payment was late. See Westlake v. Cooper, 69 Okla. 212, 171 P. 859 (1918), to the same effect.

   On other hand, subsection 3-106(b)(ii) is more liberal in favor of negotiability than prior law under pre-revision subsection 3-105(2)(b), and would change the result in Fidelity National Bank & Trust Co. of Kansas City v. McNeal, 67 F.2d 516 (lOth Cir. 1934).

6. 2. This Section amends pre-revision Section 3-105. In addition to the substantive changes, the amendments modernized this Section, for example, by omitting pre-revision subsection 3-105(1)'s listing of permissible limitations on the terms of payment. However, omitting those examples did not negate their validity. Thus, cases such as Welch v. Owenby, 73 Okla. 212,175 P. 746 (1918) (reference to underlying transaction permissible), and Oklahoma State Bank of Ada v. Hanover fire Insurance Co., 169 Okla. 116, 36 P.2d 43 (1933) (statement that draft is given in full satisfaction of claim permissible) continue to represent valid interpretations of the statute.

Laws 1961, SB 36, p. 103, § 3-106; Amended by Laws 1991, SB 25, c. 117, § 31, eff. January 1, 1992; Amended by Laws 2008, SB 1708, c. 382, § 3, eff. November 1, 2008 (Laws 2008, SB 1708, c. 382 held unconstitutional and void by Weddington v. Henry, 2008 OK 102, 202 P.3d 143, and repealed by Laws 2009, SB 991, c. 208, § 22, eff. November 1, 2009) (superseded document available); Amended by Laws 2009, SB 991, c. 208, § 3, eff. November 1, 2009 (superseded document available).