TAILIEUCHUNG - Lecture Fundamentals of business law (7/e): Chapter 5 - M.L Barron

Chapter 5 - Negotiable instruments. At the end of this chapter you should understand: the historical origins of negotiable instruments; the difference between ‘negotiability’ and ‘assignability’; the parties to, uses for and liabilities pertaining to and processes surrounding: bills of exchange, promissory notes, cheques. | This is the prescribed textbook for your course. Available NOW at your campus bookstore! NEGOTIABLE INSTRUMENTS CHAPTER 5 Learning objectives At the end of this chapter you should understand: the historical origins of negotiable instruments the difference between ‘negotiability’ and ‘assignability’ the parties to, uses for and liabilities pertaining to and processes surrounding: bills of exchange promissory notes cheques. Introduction Negotiable instrument: a document with legal rights attached to it. Can be transferred from one person to another, simply by delivery of the document (sometimes it requires endorsement). Examples: Cheques Bills of exchange Background to development of negotiable instruments Early merchants had to pay for goods and services by carrying around large quantities of coins. Merchants began writing orders to each other. Legal rules impeded them, . the nemo dat rule—you cannot transfer better title to goods than you have. To overcome nemo dat an exception developed for negotiable instruments—these can be transferred from one person to another and the transferee receives good title, even if the transferor did not have good title. The concept of negotiability Assignability (transferability): capacity to be transferred from one person to another. Negotiability: assignability, plus allows good title to pass to the transferee. Bills of exchange Unconditional orders In writing Addressed by one person (drawer) to another (drawee) Signed by the person giving a bill (the drawer) Paid on demand, or at a fixed or determinable future time Involve a certain sum of money To the order of a specified person, or to bearer Bills of exchange (cont.) Advantages Proof of debt Easily transferred Safely transferred Parties to a bill of exchange Drawer: person responsible for creating bill (creditor) Drawee: person to whom bill addressed (acceptor) Payee: person to whom payment is to be made Endorser: person who transfers rights of payment Endorsee: person to

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