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Characteristics/Features of Negotiable Instruments Commercial paper – written promises that arise out of
Negotiability – may pass from one person to commercial transactions; all such instrument is either
another similar to money negotiable or non-negotiable
o When transferability is limited, paper
may be said to be non-negotiable Formal requirements of negotiability in general
o Rule that one can pass no better title to Form and content
personal property does not apply to n.i. o Whether negotiable or non-negotiable,
o Bona fide holder while free from it depends entirely on its form and
personal defenses, is subject to real content
defenses o Valid instrument is not necessarily
Accumulation of secondary contracts – most negotiable
important feature, it is once an instrument is Matters to be considered
issued, additional parties can become involved o Whole of the instrument
o What appears on the face of instrument
Forms of Negotiable Instruments o Provisions of n.i. in section 1
Common forms
o Promissory notes – issuer has promised Non-negotiable Instrument
to pay Does not meet the requisites
o Bills of exchange – issuer has ordered a Check payable only to a specified person
third person to pay May not be negotiated but may be
Special types assigned or transferred
o Certificates of deposits Transfers are governed by Civil code
o Bank notes
o Due bills Nature of Non-negotiable
o Drafts Simple contract in writing
o Trade acceptances May not be negotiated but may assigned or
o Banker’s acceptances transferred
Bill of Exchange
1. “pay to” indicate an unconditional order to pay
2. Drawee is not really a party to the bill. He assumes
liability only when he accepts the bill and signed
(acceptor)
3. “charge the same account of” means that the amount
to be paid by the drawee is to be charged against the
funds of the drawer. BUT these may be omitted