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Optional Activity 10.1

This document is a summary of a law school assignment on negotiable instruments for MEM 6820 – Business & Construction Law at the Polytechnic University of Puerto Rico. The 3-page document defines and explores negotiable instruments, including their key characteristics and common types. It discusses the parties involved in negotiable instruments and examines their functions and importance in facilitating commercial transactions through convenient payment mechanisms and credit options. The document also covers the legal framework governing negotiable instruments and associated risks.

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19 views5 pages

Optional Activity 10.1

This document is a summary of a law school assignment on negotiable instruments for MEM 6820 – Business & Construction Law at the Polytechnic University of Puerto Rico. The 3-page document defines and explores negotiable instruments, including their key characteristics and common types. It discusses the parties involved in negotiable instruments and examines their functions and importance in facilitating commercial transactions through convenient payment mechanisms and credit options. The document also covers the legal framework governing negotiable instruments and associated risks.

Uploaded by

edwincn60
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Polytechnic University of Puerto Rico

Optional Activity 9.1

Delivery Date: 21 January 2024

Colon Nieves, Edwin

#91385

MEM 6820 – BUSINESS & CONSTRUCTION LAW

WI – 23

PROF. Johnny Elias Rivera


Negotiable instruments play a pivotal role in facilitating smooth and secure financial transactions

within the realm of commerce. These documents, recognized as legally binding by commercial

law, provide a flexible and efficient means for parties to engage in various financial activities.

The most common types of negotiable instruments include promissory notes, bills of exchange,

and checks. Here's an in-depth exploration of negotiable instruments and their significance:

1. Definition and Characteristics:

A negotiable instrument is a written document containing an unconditional promise or order to

pay a specific amount of money. The term "negotiable" implies that these instruments can be

transferred from one party to another, often through endorsement or delivery, with the new

holder acquiring the same rights as the original holder.

Key characteristics of negotiable instruments include:

Transferability: The ability to pass ownership from one party to another.

Unconditional Promise or Order: The commitment to pay a specified sum without any

contingencies.

Fixed Amount: A definite and ascertainable monetary value must be mentioned.

2. Types of Negotiable Instruments:

a. Promissory Notes:
A written promise by one party (the maker) to pay a specified sum to another party (the payee) at

a defined time.

b. Bills of Exchange:

An unconditional written order from one party (the drawer) to another (the drawee) to pay a

certain amount to a third party (the payee).

c. Checks:

A draft drawn on a bank, instructing the bank to pay a specific sum to the bearer or a named

payee.

3. Parties Involved:

a. Drawer:

The party creating the negotiable instrument.

b. Drawee:

The party ordered to make the payment, usually a bank.

c. Payee:

The party to whom the payment is to be made.

4. Functions and Importance:

a. Convenient Payment Mechanism:

Negotiable instruments offer a convenient method for making payments, particularly in

commercial transactions. They eliminate the need for direct cash transactions.
b. Credit Facilitation:

Promissory notes enable credit transactions, allowing individuals or businesses to borrow money

with a formal commitment to repay.

c. Commercial Transactions:

Bills of exchange and checks are extensively used in international trade, streamlining cross-

border transactions.

d. Financial Flexibility:

The negotiability of these instruments provides financial flexibility, enabling quick and secure

transfers of monetary value.

5. Legal Framework:

Negotiable instruments are governed by specific legal frameworks, often influenced by

established international conventions and domestic commercial laws. Uniformity in legal

standards enhances predictability and confidence in commercial transactions.

6. Risks and Protections:

While negotiable instruments provide efficiency, they are not without risks. Issues such as

forgery, fraud, and non-payment can arise. Legal protections and mechanisms, including the

concept of Holder in Due Course (HDC), exist to mitigate such risks.

Negotiable instruments, with their centuries-old history, continue to be fundamental tools in

modern commerce. Their adaptability to various financial scenarios, coupled with a well-defined

legal framework, ensures their continued relevance in facilitating transactions globally.


Understanding the intricacies of negotiable instruments is crucial for individuals, businesses, and

legal professionals engaged in the dynamic landscape of commercial dealings.

References:

 https://virtualcampus.pupr.edu/ultra/courses/_45608_1/cl/outline

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