Đang tải... (xem toàn văn)
Chapter 5 - Negotiable instruments. At the end of this chapter you should understand: the historical origins of negotiable instruments; the difference between ‘negotiability’ and ‘assignability’; the parties to, uses for and liabilities pertaining to and processes surrounding: bills of exchange, promissory notes, cheques.
This is the prescribed textbook for your course Available NOW at your campus bookstore! Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev 2-1 NEGOTIABLE INSTRUMENTS CHAPTER Copyright â 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-2 Learning objectives At the end of this chapter you should understand: • the historical origins of negotiable instruments • the difference between ‘negotiability’ and ‘assignability’ • the parties to, uses for and liabilities pertaining to and processes surrounding: – bills of exchange – promissory notes – cheques Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-3 Introduction • Negotiable instrument: a document with legal rights attached to it Can be transferred from one person to another, simply by delivery of the document (sometimes it requires endorsement) • Examples: – Cheques – Bills of exchange Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-4 Background to development of negotiable instruments • Early merchants had to pay for goods and services by carrying around large quantities of coins • Merchants began writing orders to each other Legal rules impeded them, e.g the nemo dat rule— you cannot transfer better title to goods than you have • To overcome nemo dat an exception developed for negotiable instruments—these can be transferred from one person to another and the transferee receives good title, even if the transferor did not have good title Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-5 The concept of negotiability • Assignability (transferability): capacity to be transferred from one person to another • Negotiability: assignability, plus allows good title to pass to the transferee Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-6 Bills of exchange • Unconditional orders • In writing • Addressed by one person (drawer) to another (drawee) • Signed by the person giving a bill (the drawer) • Paid on demand, or at a fixed or determinable future time • Involve a certain sum of money • To the order of a specified person, or to bearer Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-7 Bills of exchange (cont.) Advantages • Proof of debt • Easily transferred Safely transferred Copyright â 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-8 Parties to a bill of exchange • Drawer: person responsible for creating bill (creditor) • Drawee: person to whom bill addressed (acceptor) • Payee: person to whom payment is to be made • Endorser: person who transfers rights of payment • Endorsee: person to whom bill is transferred • Bearer: person in possession of bearer bill • Holder: (see next slide) Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-9 Holder of a bill of exchange • Holder: person in possession of a bill 'to bearer' – payee – endorsee • Holder for value: person in possession of bill for which value has been given • Holder in due course: person in possession of bill – that is complete and regular – taken in good faith and for value – no notice of any defect of transferor – no notice of previous dishonour Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-10 Presentation of cheques Liability rests with drawer or endorser • Drawee institution: institution upon which the cheque is drawn • Collecting institution: institution at which the cheque is presented Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-24 Types of cheque Order cheques • One person or more is specified on the cheque as payee or endorsee • Negotiated by endorsement and delivery Bearer cheque (converted to order cheque by deleting 'or bearer') • No person is specified in the cheque as payee or endorsee, or the words 'to bearer' appear on the cheque • Negotiated by delivery Crossed cheques • Specific direction to the drawee financial institution not to pay the cheque over the counter Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-25 Crossed cheques NOT NEGOTIABLE • To be paid into an account • Assignable and negotiable if: – taken in good faith – for value – not aware of any defect of title – good title passes regardless of what title giver had • Assignable – Title the giver had (nemo dat rule applies) Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-26 Capacity to incur liability Cheque drawn, issued or endorsed by a person without capacity will not place liability on the person for the cheque Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-27 Signature on the cheque • To be valid, cheque must be signed by drawer • Unauthorised signatures on cheques: – Wholly inoperative on the drawer or endorser Exceptions: estoppel ratification agent Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-28 Stale cheques Date on cheque more than 15 months earlier Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-29 Dishonoured cheques • Customer revokes institution’s authority • Insufficient funds in account • ‘Stop payment’ order • Account subject to garnishee order • Customer dead • Customer bankrupt • Material alteration of a cheque Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-30 Endorsement of cheques • Written • Placed on cheque • Signed by endorser(s) • Name misspelt—endorsee may adopt the misspelling and add own proper signature • Endorsements in order of appearance on cheque Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-31 Holder in due course Has right to: • present cheque for payment • negotiate it • give a valid discharge sue on cheque Copyright â 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-32 Holder in due course (cont.) Definition: • Cheque negotiated by holder • Cheque complete and regular on face of it • Cheque not stale • Cheque not crossed 'not negotiable’ • Cheque taken in good faith for value • Cheque without notice of dishonour or defect of transferor’s title i.e holder has legal right to payment Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-33 Liability of parties to a cheque • Liability of drawer: for value of cheque at time of issue • Liability of endorser: to holder or subsequent endorsers only • Liability of 'strangers': a person who is willing to 'back the cheque' is liable as an endorser • Liability on dishonour: sum ordered to be paid plus amount of interest Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-34 Discharge of liabilities • Payment in due course • Renunciation of rights by the holder • Cancellation of the cheque or drawer’s signature • Material alteration of the cheque Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-35 Duties of drawee (financial institution) and drawer • Respective parties will not be liable if duties followed • Duty to act in good faith and without negligence • Collecting institution also has duty to act in good faith and without negligence Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-36 Duties of drawee (financial institution) and drawer (cont.) Drawee—financial institution Drawer Act in good faith and without negligence Take reasonable care when drawing cheques to eliminate possibility of fraudulent alterations If amount fraudulently altered, pay Take reasonable care to ensure original amount cheques are not accessible for forgery If crossed cheque, must be paid into account If forged signature, customer’s account cannot be debited If paying on endorsee’s signature, acting in good faith and without negligence Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-37 Revocation of a financial institution’s authority to pay cheques • Countermand of payments (stop payment order): – Clear – Communicated to responsible official – Given before cheque presented for payment • Notice of incapacity – Notice of drawer’s mental capacity • Notice of drawer’s death – Unless notice not received from entitled person within 10 days of drawee bank becoming aware of drawer’s death Copyright © 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev •2-38 ... Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-1 1 Uses of a bill of exchange • Payment of imports • Payment of exports • Avoidance of transfers of cash Can be discounted... 2014 McGraw-Hill Education (Australia) Pty Ltd PPTs to accompany Barron, Fundamentals of Business Law 7Rev • 2-1 6 Dishonour of a bill of exchange On presentation Non-acceptance Non-payment Copyright... accompany Barron, Fundamentals of Business Law 7Rev • 2-9 Holder of a bill of exchange • Holder: person in possession of a bill 'to bearer' – payee – endorsee • Holder for value: person in possession of