negotiable instruments

NegotiableInstrumentsWhatisNegotiableInstruments?•Thetermnegotiableinstrumentsmeansawrittendocumentwhichentitlesapersontoasumofmoney.•Anegotiableinstrumentsistransferablebydeliveryorbyendorsementanddelivery.•Thetransferentitlesapersontothesumofmoneymentionedtherein.•“Thusthenegotiableinstrumentisadocumentwhichislegallyrecognizedbycustomoftradeorlaw,transferablebydeliveryorbydeliveryandendorsement”.Howmanynegotiableinstrumentswehave?•Wehavethreemainnegotiableinstruments.•1.Promissorynote•2.BillofExchange•3.CheckWhatisNegotiation?•WhenaPromissorynote,Billofexchangeorcheckistransferredtoanyperson,tomakethatpersontheownerofthenegotiableinstruments,thentheinstrumentissaidtobenegotiated.CharacteristicsoftheNegotiability•Aninstrumentisnegotiablebyvirtueofthefollowingfeatures,•1.Transferablebydelivery•2.Entitledtoreceivemoney•3.FilingasuitCharacteristicsoftheNegotiability•1.Transferablebydelivery:•Theinstrumentistransferablebydeliveryorbyendorsementanddelivery.•2.Entitledtoreceivemoney:•Thelegalholderoftheinstrumentisentitledtoreceivemoneymentionedinit.CharacteristicsoftheNegotiability•3.Filingasuit:•Theholderofanegotiableinstrumenthastherighttofileasuitinhisnameforpaymentfromalloranyoftheconcernedparties.WhatisPromissorynote?•APromissorynoteisthesimplestandearliestkindofcreditinstrument.•“Itisanunconditionalwrittenpromisebyonepersontoanotherinwhichthemaker(payer)promisetopayondemandoratafixedordeterminabledateinthefuture,astatedsumofmoneytoortotheorderofaspecifiedpersonorthebeareroftheinstrument”.EssentialfeatureofthePromissorynote•ThefollowingaretheessentialfeaturesofaPromissorynote,•1.Thepromisetopaymustbeinwriting.•2.Thepromisetopaymustbesignedbythemakerorpayer.•3.Thepromisetopaymustbeunconditional.•Aninstrumentcontainingapromisetopayasumafterdeductingnecessaryexpensesorimposinganyotherconditionisnotapromissorynote.•Ipromisetopayasadororder$500ispromissorynote.•Ipromisetopayasad$500sevendaysafteryasirarrivaltoKabul.EssentialfeatureofthePromissorynote•4.Theamounttobepaidmustbedefiniteintermsofmoney.•5.ThePromissorynotemustbepayableondemandoratafixedordeterminablefuturedate.•6.ThePromissorynotemustbepayabletoadefiniteperson.ThePayeemustbecertain.•7.Itmustbearstampattherateprescribedbylawofacountry.•8.Therearetwopartiesapromissorynote.•(i)Maker•(ii)PayeeEssentialfeatureofthePromissorynote•(i)Maker:•HeisthepersonwhodrawsandsignsthePromissorynoteandpromisetopaytheamount.•InthespecimenofPromissorynoteRafiqAhmadisthemaker.•(ii)Payee:•Heisthepersontowhomtheamountofthepromissorynoteispayable.•InspecimenAkramKhanispromisedtopayment.HeisthusPayee.SpecimenofaPromissoryNote•$5,000KabulMay10,2008StampSixtydaysafterforvaluereceived,Ipromisetopay,AkramkhanororderthesumofDollar5,000only.AkramKhanShehrenewRafiqAhmadKabulSignatureBillofExchange•Abillofexchangeisplayinganimportantpartinthecommerciallifeofthecountry.Theneedforitariseswherethebuyerofgoodsneedsaperiodofcreditbeforepayingit.•Itisdrawnbythecreditorsandisacceptedbydebtor.WhatisBillofExchange?•AccordingtoMuller,Abillofexchangeisanunconditionalorderinwritingaddressedbyonepersontoanother,signedbythepersongivingit,requiringthepersontowhomitisaddressedtopayondemandoratafixedordeterminablefuturetime,asumcertaininmoneytoortotheorderofacertainpersonortobearer.FeaturesorCharacteristicsofthebill•Themaincharacteristicsorfeaturesofabillofexchangeareasfollow:•ABillofExchangemustbeinwriting.•Itmustcontaininordertopay.•Theordertopaymustbeunconditional.Ifitissubjecttothehappeningofsomeevents,itwillnotbeabillofexchange.•Itmustbesignedbythedrawerandproperlystamped.FeaturesorCharacteristicsofthebill•Thepartiestothebill,thedrawer,thedrawee,andpayeemustbecertainanddefiniteindividuals.•Theamountpayablemustbecertain.•Thepaymentmustbemadeinmoney.•Thebillpayablemaybeeitherondemandorafteraspecifiedperiod.•Thebillmaybepayableeithertothebearerortotheorderofpayee.PartiestotheBillofExchange•Accordingtothedefinitiontherearethreepartiesinvolvedtoabillofexchange.–Drawer–Drawee–PayeePartiestotheBillofExchange•(i)Drawer:•Thedraweristhepersonwhodrawsthebill.Heisthepersonwhoorderstopayacertainsumofmoney(InthespecimenofthebillHamidisdrawerofthebill)•(ii)Drawee:•Heisthepersononwhomthebillisdrawn.Heisthepersonwhoisorderedtomakepaymentofthebill(InthespecimenofbillRashidAhmadisthedraweeofbill).PartiestotheBillofExchange•(iii)Payee:•Heisthepersontowhommoneyisdirectedtobepaid.Hegetsthepaymentsofthebill.(InthespecimenofbillKamalAkmalisthePayeeofbill).SpecimenofaBillofExchange•$8,000KabulMay17,2008StampTwomonthsafterdatepaytoMrKamalorhisorderthesumofDollar8,000only,forvaluereceived.ToRashidAhmadJalalAbadHamidZafarAfghanistanSignatureCHECK•WhatisaCheck?•Acheckmaybedefinedaswrittenorderofadepositoruponabanktopaytoortotheorderofadesignatedpartyortothebearer,aspecifiedsumofmoneyondemand.•Thepersonwhodrawsthecheckiscalleddrawer,thebankonwhichthecheckisdrawniscalleddrawee,andthepersontowhompaymentistobemadeiscalledPayee.FeaturesorCharacteristicsoftheCheck•ThemaincharacteristicsorfeaturesofaCheckareasfollow:–Itisanorderof