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Business Laws and Regulation

The document outlines the requirements for a negotiable instrument, including the necessity for it to be in writing, signed, and contain an unconditional promise to pay a sum certain. It details the roles of parties involved, such as the maker, drawer, drawee, and payee, and specifies conditions under which instruments are payable on demand or to order. Additionally, it explains the concept of certainty regarding sums and the conditions for an instrument to be payable to bearer.

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Chinny Leir Sylvester
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1 views

Business Laws and Regulation

The document outlines the requirements for a negotiable instrument, including the necessity for it to be in writing, signed, and contain an unconditional promise to pay a sum certain. It details the roles of parties involved, such as the maker, drawer, drawee, and payee, and specifies conditions under which instruments are payable on demand or to order. Additionally, it explains the concept of certainty regarding sums and the conditions for an instrument to be payable to bearer.

Uploaded by

Chinny Leir Sylvester
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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NEGOTIABLE INSTRUMENT LAW Section 1. Form of negotiable instrument.

- An instrument to be
negotiable must conform to the following requirements:

PARTIES TO NEGOTIABLE INSTRUMENT (a) It must be in writing and signed by the maker or drawer.
● Promissory Note
1. Maker
2. Payee (any person who holds the instrument after is (b) Must contain an unconditional promise or order to pay a
called a holder) sum certain in money;
● Bills of Exchange
1. Drawer (buyer) (c) Must be payable on demand, or at a fixed or determinable
2. Drawee (person that’s going to pay upon maturity, future time;
eg. Bank)
3. Payee (seller or holder)
(d) Must be payable to order or to bearer; and

Flow of Negotiable Instrument (e) Where the instrument is addressed to a drawee, he must
be named or otherwise indicated therein with reasonable
Promissory Note Bill of Exchange certainty.

1. Issuance by maker. 1. Issuance by drawer.


Section 2. What constitutes certainty as to sum. - The sum
2. Acceptance of payee 2. Negotiation - delivery and/or
indorsement. payable is a sum certain within the meaning of this Act., although
is to be paid:
3. Negotiation - delivery and/or 3. Presentment for acceptance.
indorsement. (a) With interest; or
4. Presentment for payment. 4. Acceptance by
drawee/protest. (b) By stated installment; or

5. Payment or notice of 5. If protested, acceptance for (c) By stated installment, with provision that, upon default in
dishonor. honor.
payment of any installment or of interest, the whole shall
6.Discharge of Instrument. 6. Presentment for payment/ become due; or
payment for honor.
(d) With exchange, whether at a fixed rate or at the current rate;
7. Payment.
or
8. Discharge of instrument.
(e) With costs of collection or an attorney’s fee, in case
payment shall not be made at maturity.
Section 3. When promise is unconditional. - An unqualified Section 7. When payable on demand. - An instrument is
order or promise to pay is unconditional within the meaning of the payable on demand:
Act though coupled with:
(a) When it is so expressed to be payable on demand, or
(a) An indication of a particular fund out of which at sight, or on presentation; or
reimbursement is to be made or a particular account to be (b) In which no time for payment is expressed.
debited with the amount; or
● Where an instrument is issued, accepted, or indorsed when
(b) A statement of the transaction which gives rise to the overdue, it is, as regards the person so issuing, accepting,
instrument. or indorsing it, payable on demand.

● But an order or promise to pay out of a particular fund is not


unconditional.

Section 8. When payable to order. - The instrument is payable to


Section 4. Determinable future time; what constitutes. - An order where it is drawn payable to the order of a specified person
instrument is payable at a determinable future time, within the or to him or his order. It may be drawn payable to the order of;
meaning of this Act., which is expressed to be payable:
(a) A payee who is not maker or drawer, oe drawee; or
(a) At a fixed period after date or sight; or (b) The drawer or maker ; or
(c) The drawee; or
(b) On or before a fixed or determinable future time specified (d) Two or more payees jointly; or
therein; or (e) One or some of several payees; or
(f) The holder of an office for the time being.
(c) On or at a fixed period after the occurrence of a specified
event which is certain to happen, though the time of ● Where the instrument is payable to order, the payee must
happening be uncertain. be named or otherwise indicated therein with reasonable
certainty.
● An instrument payable upon a contingency is not
negotiable, and the happening of the event does not cure
the defect.

EXAMPLES:
The foregoing illustration show the general outline and principal
features of a negotiable promissory note:

1. Payable to order:

Section 9. When payable to the bearer. - The instrument is


payable to bearer:

(a) When it is expressed to be so payable; or

(b) When it is payable to a person named therein or bearer; or

(c) When it is payable to the order of a fictitious or non-existing


person, and such fact was known to the person making it so
payable ; or

(d) When the name of the payee does not purport to be the
name of any person; or

(e) When the only or last indorsement is an indorsement in


blank.

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