Negotiable Instruments

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Negotiable instruments

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A document which is signed and is an instruction to pay an amount of money.

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Negotiable instruments

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A legal document signed by its maker that promises unconditionally to pay a specific sum at a specific time to the person who presents it or to order, i.e., a check, money order, draft,note, certificate of deposit, or other similar document, as long as itcan be transferred to another person. Also called negotiable paper.

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1. a substitute for money 2. media of exchange for most commercial transaction 3. medium of credit transaction.

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Function and importance of Negotiable Instruments

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1. Negotiability

2. Accumulation of secondary contracts

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Characteristics or features of Negotiable Instruments

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Negotiability

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is that quality or attribute of a bill or note

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Accumulation of secondary contacts

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as they are transferred from one person to another

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Promissory notes

Bills of exchange

Special types–Certificates of deposits, bank notes, due bills, bonds, drafts, trade acceptances,and banker’s acceptance

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Forms of Negotiable Instruments

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1. Letter credit 2. Treasury warrant 3. Postal money order 4. Bill of lading 5. Certificate of Stock 6. Warehouse receipt

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Instruments with limited negotiability

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Promissory note

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– is an 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 order or to bearer.

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Maker

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The one who makes and the party to whom the promise and signs the instrument is called

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Payee

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The party to whom the promise is made or the instrument is payable is called the

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Bill of exchange

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is an unconditional order in writing addressed by one person to another, signed by the person giving it, and requiring the person to whom it is addressed to pay upon demand or at fixed or determinable future time a sum certain in money to order or to bearer. also known as order paper

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Check

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common type or order paper

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Drawer

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The person who is issues and draws the order bill is called

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Drawee

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The party upon whom the bill is drawn is called

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Payee

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The party in whose favor the bill is originally issued or is payable is called the

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Drawer’s funds in hands of drawee

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the fundamental idea and purpose of a bill of exchange is that the drawer has funds in the hands of drawee which former desires to be paid to the payee

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Liability of drawee for non-payment

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If the drawee refuse to accept when he has funds for the purpose, he becomes liable to the drawer ( not the payee) for the resulting damages and the harm done to his credit.

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Payment of fixed amount of money

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Not express a sum certain:

A. “to pay 1,000 or what may be due on my current deposit”

B. “to pay 1,000 and also all other sums which may be due to him

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Interest at fixed rate

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Example:“ I promise to pay Xander or order 10,000, with interest at 15% per annum”

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Interest at increased or reduced rate

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Example:

“I promise to pay Mocha or order 10,000 with interest a 15% per annum, from date until paid; 12% if paid when due"

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Sum to paid by stated installment

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Example:

I promise to pay Marlou or order the sum of 10,000 in two installment as follows: 5,000, on or before November 24, 2017 and 5,000, on or before December 25, 2017

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Sum to be paid with exchange

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refers to instrument that are payable in foreign currency. the promise or order to pay “ with exchange “ does not destroy negotiability.

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exchange

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it is charge for the expense of providing funds at the place where the instrument is payable to meet the instrument which is issued at another place.

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Order

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is a command or imperative direction and, therefore, a mere request, supplication, or authority.

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Payable at fixed time

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Example: “I promise to pay or order the sum of P10,000 on October 10, 2017.

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Payable at a fixed period after date

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Example: “ Sixty days after date, I promise to pay Mr. Ben or order the sum of P10,000"

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Payable at a fixed period after sight

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Example; “Sixty days after sight, pay to the order of Xander the sum of P10, 000”

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Payable on or before a fixed time

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Example:” On or before November 24, 2017, I promise to pay Mr. Ben or order P10,000.

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Payable on or before a determinable future time

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Example: “On or before the start of the next school semester, I promise to pay Mr Ben or order P10,000"

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Payable on the occurrence of a specific event

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Example: “I promise to pay Mr Marlou or order the sum of P10,000 upon the death of his father"

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Payable upon a contingency

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Example: “Pay to the order of Mr. Ben the sum of P10,000 upon his reaching the age of majority” this is non-negotiable instrument.

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Time instrument

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The instrument that are not payable on demand, called

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Bearer

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- means the person is possession of a bill or note which is payable to bearer or legally as a bearer instrument.

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fictitious person

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is meant to be one who, though named as payee in an instrument, has no right to it because the maker or drawee so intended and it matters not, whether the name of the payee used by him be that one living or dead, or one who never existed.