PRINCIPLES OF BUSINESS LAW

PRINCIPLES OF BUSINESS LAW-NEGOTIABLE INSTRUMENTClass of documents used in commercial and financial transactions.Used in both domestic and international trade.All negotiable instruments are choses in action. It mean the action is incorporeal property which comprises rights which may be transferred from one person to another.Form of transfer of property from one person to another in a document evidencing a contractual obligation to pay money.CONCEPTS OF NEGOTIABILITYInstruments and the rights contained in it which are transferred by mere delivery or where it is payable to order by indorsement plus delivery.Holder who is in possession of the instruments can sue in his own name.Debtor need not given notice of this transfer. Example: not inform bank to draw cheque.The transferee who has received it in good faith and for value gets a superior title and is therefore unaffected by previous defects.Characteristics of N.IBills of ExchangeChequesPromissory notesBankers draftBank notesTreasury billsShare warrantsDividens warrantsDebenturesTravellers chequeeTypes of Negotiable InstrumentsWritten promise that the person who takes the bill will be paid the amount stated in the bill when he presents it at the proper place and time.

BILLS OF EXCHANGEDefined in section 73 of the Bills of Exchange Act 1949 as a bill of exchange drawn on a banker payable on demand.Banker will pay the sum of money specified on it.payable on demand does not mean the cash it immediately. It means it bears or within a reasonable time after that date payment will be made. Usually within six month otherwise the cheque will be stale and not honoured by bank.How about Post Dated Cheques?CHEQUESSection 88 (1) of the Bills of Exchange Act 1949 defines promissory notes as unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to or to the order of a specified person or bearer.(In short it is a document which contains a promise by the maker that he will pay a certain sum of money)PROMISSORY NOTESIt usually in the form of demand drafts and cashier orders are issued by bank to customer of good standing on request and against payment by the customer which is usually effected by debiting the customers account.It may be issued by a branch addressed to its head office or another branch of the same bank.BANKERS CHEQUESBankers draft payable to the bearer. It is a promissory note issued by a banker as payable to the bearer on demand. In other words, a bank note is simply a particular form of bankers draft. BANK NOTES

Issued by the government to raise short term loans.Usually bills with a term of ninety-two daysTREASURY BILLS

SHARE WARRANTS and DIVIDEND WARRANTSSHARE WARRANTS-Company issue a warrant stating that the bearer is entitled to the shares specified in the warrant.DIVIDENS WARRANTS-Documents issued by a company directing its banker or a bank to pay to a named shareholder a specified sum of money, being the shares of the declared dividend to which he is entitled. Usually it takes form of a cheque or bankers draft, in other cases it specified to be not negotiable

Documents given as acknowledgement of indebtedness.Most common debentures are those issued by a corporation acknowledging a long term loan to the corporation.DEBENTURES

Special form of a bankers draft which enables the holder to draw cash on it.Order made by the customer, addressed to the bank and requiring it to pay to himself or his order the sum of money specified.TRAVELLERS CHEQUE

Section 3(1) Bills of Exchange Act 1949 A bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to, or to the order of a specified person or to bearerNATURE OF BILLS OF EXCHANGEAn unconditional orderIn writingAddressed by one person to anotherSigned by person giving itRequiring the person to whom it is addressed to pay in the future certain sum of moneyTo the order of specified personSupported by considerationCapacity to contract by bill of exchangeDate of bill

CHARACTERISTICState the characteristic of a bill of exchangeWhat is meant by the word negotiations in the context of the Law of Banking. Illustrate with example of negotiable instrumentsQuestion