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INSTRUMENTS
PRESENTED BY
SEHRISH TAHIR 18227
KANZA NUSRAT KHAN 16053
Chapter 10 Negotiable
instrument law
1 OVERVIEW
2 ISSUE OF THE NEGOTIABLE INSTRUMENTS
3 ENDORSEMENT
4 ACCEPTANCE
5 GUARANTEE
6 PAYMENT
7 DISHONOR AND RIGHT OF RECOURSE
8 PROTECTION OF LOST-INSTRUMENT HOLDERS
9 STATUTE OF LIMITATIONS
Overview
1.1 Concept
Means of payment
Constitute independent contract embodying a payment
obligation and distinct from that of other contracts or
transactions by virtue of which such instruments are issued
Parties to bill of exchange
A B C D
Drawer Payee Endorsee Endorsee
Endorser Endorser Bearer
P
Drawee E
Guarantor Right-holder
Secondary
debtor
Primary
debtor
Parties to promissory note
A B C D
Drawer Payee Endorsee Endorsee
Endorser Endorser Bearer
E
Guarantor Right-holder
Primary Secondary
debtor debtor
Parties to cheque
A B C D
Drawer Payee Endorsee Endorsee
Endorser Endorser Bearer
P (Banks)
Drawee
Right-holder
Secondary
debtor
Negotiable instrument relations in bill of exchange
and cheque
A B C D
Drawer Payee Endorsee Endorsee
Endorser Endorser Bearer
P
Drawee Non-negotiable instrument relation
Negotiable instrument relations in promissory note
A B C D
Drawer Payee Endorsee Endorsee
Endorser Endorser Bearer
Bill of exchange
(1) unconditional
(2) a written order
(3) signed by the drawer
(4) addressed to the drawee
(5) pay a specified sum of money
(6) pay either on demand, or at a determinable future time
Promissory note
(1) an unconditional promise
(2) made in writing
(3) signed by the maker of the note
(4) pay a specified sum of money
(5) addressed to the payee or the bearer
(6) pay on demand
Cheque
(1) a bill
(2) payable on demand
(3) for a specified sum of money
(4) always drawn against a bank or other non-bank financial
institutions
(5) unconditional
Comparison
Comparison among bill of exchange, promissory note and cheque
Promissory
Bill of exchange Cheque
note
Nature Entrusted payment Self payment Entrusted payment
Drawer & Drawer, drawee,
Basic parties Drawer, drawee, payee
payee payee
Payers
No restriction Drawer Banks
qualification
Primary debtor Acceptor Drawer No
On demand
Maturity On demand On demand
Determinable future time
Acceptance
Issue of the negotiable
instruments
Drawers
qualification
Bill of exchange: drawer must have genuine
payment relationship with the payer who has reliable
funds to pay for the sum specified in it.
Bill of exchange without consideration: prohibited.
2.3.3 Cheque
General presumption:
(1) place of payment: business premises of drawee
(2) place of issue:business premises, domicile or habitual residence of drawer
Endorsement
Negotiability
of the remaining parties Assignment is distinguished from
ordinary assignments:
(1) negotiable instruments may be assigned from one bearer to
another without any notice on payer about each new holder
(2) assignee may sometimes acquire better right to sue on the
instrument than his predecessor had
(3) bearer may sue in his own name any other party liable on the
instruments without joining any
Occurrence Certificate
Upon maturity Non-payment Certificate of refusal
Prior to maturity Non-acceptance Certificate of refusal
Drawee or acceptors death or Bankruptcy order
disappearance Administrative decision
Drawee or acceptors
bankruptcy
Drawee or acceptors closure
Notice of dishonor
Bearer shall inform the previous parties:
within 3 days from receipt of certificate of
dishonor or rejection of acceptance
Statute of limitations