Description
The PPT highlighting about negotiable instruments presentation.
Negotiable Instruments
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Capable of being negotiated Easy or possible to negotiate or be negotiated Transferable from one person to another by delivery or by delivery and endorsement Capable of being passed, traversed, or crossed A means or implement by which something is achieved, performed, or furthered (an instrument of crime) A document (as a deed, will, bond, note, certificate of deposit, insurance policy, warrant, or writ) evidencing rights or duties esp. of one party to another under the law (no person is liable on an instrument unless his signature appears thereon - Uniform Commercial Code) Most securities are negotiable, which means that they can be easily transferred from one party to the next, provided all proper documentation is included. Securities: An instrument representing ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives).examples could include a note, stock, preferred share, bond, debenture, warrant, or virtually any other financial asset
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Development of law related to Negotiable Instruments
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It is a story of evolution of currency. Agriculture, traveling and exchange of goods were the three basic ingredients of early human society. Exchange of goods meant trade, growing trade led to transfer of wealth. Wealth would usually indicate stock of food grains, cattle or reserve of precious metals and stones. Precious metals like gold, silver and copper became the medium of exchange.
(Medium of Exchange - An intermediary instrument used to facilitate the sale, purchase or trade of goods between parties. In modern economies the medium of exchange is currency.)
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Currency is the creation of a circulating medium of exchange based on a store of value. To act as a store of value, a commodity or form of money or financial capital must be able to be reliably saved, stored, and retrieved - and be predictably useful when it is so retrieved. Currency evolved from two basic innovations: the use of counters to assure that shipments arrived with the same goods that were shipped, and the use of silver ingots to represent stored value in the form of grain. Both of these developments had occurred by 2000 BC.
Development of law related to Negotiable Instruments
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Usage of gold, silver, copper and other precious stones became increasingly dangerous as the usual route of trade would be roads or sea. Traders started making notes mentioning the maker of note, amount and also name of receiver. ? P sells goods to Q and collects 100 gold coins. ? R a trader from the same city as P has to buy goods from Q. ? R has to bring 100 gold coins to give to Q. Here P has to take back 100 gold coins from a route full of robbers and pirates looting money and also R has to bring money to be given to Q from the same dangerous route. ? To escape this danger, P and R arrive at an arrangement. P collects 100 gold coins and gives them to R, who in turn, makes his payment to Q, with those gold coins. And R promises to pay P the money after reaching home. ? In this arrangement, both P and R do not need to carry precious gold in the journey. With the advent of writing R came to write a note stating: “I promise to pay 100 gold coins to P.” Such a note that promises to pay, was called a Promissory Note.
Development of law related to Negotiable Instruments
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?
Now P is holding the promissory note from R. P wants to buy certain goods from S but he has no money. He tells S that he has a promissory note given by R. on the back of the note he writes directing R to pay the money to S instead. Through this process, a piece of paper passes around and acquires commercial significance. The use of this paper had several advantages. It enhanced safety and facilitated trade. Now when P makes the following note,
Mr. R Pay Mr. S 100 coins. Yours P.
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Now this instrument involving 3 parties came to be called as a Bill of Exchange. This also became a means of taking a loan from a trader whose reputation was such that his promise would never fail. Certain traders came to specialize in the money market, keeping money for the traders and giving it away on their instructions. This concept further developed to become a bank. A Bill of Exchange drawn on a bank came to be called a Cheque.
Negotiable Instruments Act 1881
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It is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques. The Act is based on English Common Law relating to negotiable instruments. It is a codification of the English Common Law on the subject, which in turn, is derived from the usages and customs of merchants, commonly known as the law merchant. With the usage of these instruments, the common law courts developed the rights and liabilities of the different parties. Later, the law regarding them was written down. The one operating in India is called the Negotiable Instruments Act, 1881. This Act recognises three main kinds of instruments –
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promissory notes, bills of exchange and cheques.
Promissory Note
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It is an instrument in writing Containing an unconditional undertaking Signed by the maker To pay a certain sum of money only – ? To a certain person, or ? To the order of a certain person, or ? To the bearer of the instrument “I promise to pay B or order, Rs. 300.” “I acknowledge myself to be indebted to B in Rs. 5000, to be paid on demand, for value received.” ? Bearer ? Order ? Demand No person other than RBI or Central Govt. can make or issue a promissory note „payable to bearer?.
8 essential elements of a promissory note
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It must be in writing It must contain an undertaking to pay The undertaking to pay must be unconditional It must be signed by the maker The maker of the note must be certain The sum payable must be certain The promise should be to pay money, and money only The payee must be certain ? “Rs. 1,000 balance due to you I am still indebted and do promise to pay.” ? “received of A Rs. 2,000, which I promise to pay on demand with interest” ? “I do acknowledge myself to be indebted to A in rs. 3,000 to be paid on demand for value received.”
Specimens of Promissory Notes
Mumbai, 1st April 2005. Rs. 6,000/ON DEMAND I promise to pay Sunjay Dutt, THE SUM OF SIX THOUSAND RUPEES. Sd/- Kareena Kapoor
Delhi, 6st June 2004. ON DEMAND I promise to pay David Devidar, THE SUM OF FOUR THOUSAND RUPEES FOR VALUE RECEIVED. Sd/- Jhumpa Lahiri Lucknow, 10th October 2005. ON DEMAND I promise to pay Tulsi Virani, or Order, the sum of ten thousand rupees, with interest on the said sum at 10% (ten per cent) per annum till payment. Sd/- Parvati Patel Bangalore, 4th July 2005. THREE MONTHS AFTER DATE, I promise to pay SHOBHA DE, the sum of Rupees five thousand only. Sd/- ANEETA DESAI.
Bill of Exchange
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An instrument in writing Containing an unconditional order Signed by the maker Directing a certain person To pay a certain sum of money only –
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To a certain person, or To the order of a certain person, or To the bearer of the instrument
In a BE there are 3 parties, in a PN there are 2 parties Bill contains an order to pay, PN contains a promise to pay Liability of a drawer of a Bill is secondary and conditional; it crystallizes on the acceptor?s failue to honour the bill; liability of a maker of PN on the other hand is, primary and absolute. In BE immediate relation only between drawer of an accepted bill and the acceptor. In PN immediate relation between maker of a note and the payee. Bills can be drawn in sets; PN cannot be so drawn.
Specimen of Bills of Exchange
Mumbai, 26th January 2005. Rs. 5,000/SIX DAYS after date, pay to Rahul Gandhi, the sum of five thousand rupees only for value received. Sd/- Milind Deora. To Murli Deora, 30, Mahatma Gandi Road, Mumbai – 400 023.
Mumbai, 26th January 2005. Rs. 5,000/SIX DAYS after date, pay to Rahul Gandhi, the sum of five thousand rupees only for value received. Sd/- Milind Deora. To Murli Deora, 30, Mahatma Gandi Road, Mumbai – 400 023. Accepted Sd/- Rahul Gandhi
Cheque
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A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. It?s a BE but here the mode of payment is different. This must be drawn on a banker and the payment must be made on demand. All cheques are bills of exchange but all bills of exchange are not cheques. All rules which apply to a BE also apply to a cheque.
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In case of a cheque, the drawee must always be a specified banker. In the case of a bill of exchange, anybody can be a drawee.
BANK OF MAHARASHTRA Mumbai, 26th January 2005. NO. SB 8008008 PAY TO ABC OR BEARER RUPEES TWENTY THOUSAND ONLY.
Rs. 20,000/SD/- XYZ
doc_469279403.ppt
The PPT highlighting about negotiable instruments presentation.
Negotiable Instruments
? ? ? ? ?
Capable of being negotiated Easy or possible to negotiate or be negotiated Transferable from one person to another by delivery or by delivery and endorsement Capable of being passed, traversed, or crossed A means or implement by which something is achieved, performed, or furthered (an instrument of crime) A document (as a deed, will, bond, note, certificate of deposit, insurance policy, warrant, or writ) evidencing rights or duties esp. of one party to another under the law (no person is liable on an instrument unless his signature appears thereon - Uniform Commercial Code) Most securities are negotiable, which means that they can be easily transferred from one party to the next, provided all proper documentation is included. Securities: An instrument representing ownership (stocks), a debt agreement (bonds), or the rights to ownership (derivatives).examples could include a note, stock, preferred share, bond, debenture, warrant, or virtually any other financial asset
?
?
?
Development of law related to Negotiable Instruments
? ?
?
It is a story of evolution of currency. Agriculture, traveling and exchange of goods were the three basic ingredients of early human society. Exchange of goods meant trade, growing trade led to transfer of wealth. Wealth would usually indicate stock of food grains, cattle or reserve of precious metals and stones. Precious metals like gold, silver and copper became the medium of exchange.
(Medium of Exchange - An intermediary instrument used to facilitate the sale, purchase or trade of goods between parties. In modern economies the medium of exchange is currency.)
?
?
Currency is the creation of a circulating medium of exchange based on a store of value. To act as a store of value, a commodity or form of money or financial capital must be able to be reliably saved, stored, and retrieved - and be predictably useful when it is so retrieved. Currency evolved from two basic innovations: the use of counters to assure that shipments arrived with the same goods that were shipped, and the use of silver ingots to represent stored value in the form of grain. Both of these developments had occurred by 2000 BC.
Development of law related to Negotiable Instruments
? ?
?
Usage of gold, silver, copper and other precious stones became increasingly dangerous as the usual route of trade would be roads or sea. Traders started making notes mentioning the maker of note, amount and also name of receiver. ? P sells goods to Q and collects 100 gold coins. ? R a trader from the same city as P has to buy goods from Q. ? R has to bring 100 gold coins to give to Q. Here P has to take back 100 gold coins from a route full of robbers and pirates looting money and also R has to bring money to be given to Q from the same dangerous route. ? To escape this danger, P and R arrive at an arrangement. P collects 100 gold coins and gives them to R, who in turn, makes his payment to Q, with those gold coins. And R promises to pay P the money after reaching home. ? In this arrangement, both P and R do not need to carry precious gold in the journey. With the advent of writing R came to write a note stating: “I promise to pay 100 gold coins to P.” Such a note that promises to pay, was called a Promissory Note.
Development of law related to Negotiable Instruments
?
?
Now P is holding the promissory note from R. P wants to buy certain goods from S but he has no money. He tells S that he has a promissory note given by R. on the back of the note he writes directing R to pay the money to S instead. Through this process, a piece of paper passes around and acquires commercial significance. The use of this paper had several advantages. It enhanced safety and facilitated trade. Now when P makes the following note,
Mr. R Pay Mr. S 100 coins. Yours P.
? ?
?
Now this instrument involving 3 parties came to be called as a Bill of Exchange. This also became a means of taking a loan from a trader whose reputation was such that his promise would never fail. Certain traders came to specialize in the money market, keeping money for the traders and giving it away on their instructions. This concept further developed to become a bank. A Bill of Exchange drawn on a bank came to be called a Cheque.
Negotiable Instruments Act 1881
?
It is an Act to define and amend the law relating to promissory notes, bills of exchange and cheques. The Act is based on English Common Law relating to negotiable instruments. It is a codification of the English Common Law on the subject, which in turn, is derived from the usages and customs of merchants, commonly known as the law merchant. With the usage of these instruments, the common law courts developed the rights and liabilities of the different parties. Later, the law regarding them was written down. The one operating in India is called the Negotiable Instruments Act, 1881. This Act recognises three main kinds of instruments –
?
?
?
? ? ?
promissory notes, bills of exchange and cheques.
Promissory Note
? ? ? ?
? ?
?
It is an instrument in writing Containing an unconditional undertaking Signed by the maker To pay a certain sum of money only – ? To a certain person, or ? To the order of a certain person, or ? To the bearer of the instrument “I promise to pay B or order, Rs. 300.” “I acknowledge myself to be indebted to B in Rs. 5000, to be paid on demand, for value received.” ? Bearer ? Order ? Demand No person other than RBI or Central Govt. can make or issue a promissory note „payable to bearer?.
8 essential elements of a promissory note
? ? ? ? ? ? ? ?
It must be in writing It must contain an undertaking to pay The undertaking to pay must be unconditional It must be signed by the maker The maker of the note must be certain The sum payable must be certain The promise should be to pay money, and money only The payee must be certain ? “Rs. 1,000 balance due to you I am still indebted and do promise to pay.” ? “received of A Rs. 2,000, which I promise to pay on demand with interest” ? “I do acknowledge myself to be indebted to A in rs. 3,000 to be paid on demand for value received.”
Specimens of Promissory Notes
Mumbai, 1st April 2005. Rs. 6,000/ON DEMAND I promise to pay Sunjay Dutt, THE SUM OF SIX THOUSAND RUPEES. Sd/- Kareena Kapoor
Delhi, 6st June 2004. ON DEMAND I promise to pay David Devidar, THE SUM OF FOUR THOUSAND RUPEES FOR VALUE RECEIVED. Sd/- Jhumpa Lahiri Lucknow, 10th October 2005. ON DEMAND I promise to pay Tulsi Virani, or Order, the sum of ten thousand rupees, with interest on the said sum at 10% (ten per cent) per annum till payment. Sd/- Parvati Patel Bangalore, 4th July 2005. THREE MONTHS AFTER DATE, I promise to pay SHOBHA DE, the sum of Rupees five thousand only. Sd/- ANEETA DESAI.
Bill of Exchange
? ? ? ? ?
An instrument in writing Containing an unconditional order Signed by the maker Directing a certain person To pay a certain sum of money only –
? ?
?
? ? ? ? ? ?
To a certain person, or To the order of a certain person, or To the bearer of the instrument
In a BE there are 3 parties, in a PN there are 2 parties Bill contains an order to pay, PN contains a promise to pay Liability of a drawer of a Bill is secondary and conditional; it crystallizes on the acceptor?s failue to honour the bill; liability of a maker of PN on the other hand is, primary and absolute. In BE immediate relation only between drawer of an accepted bill and the acceptor. In PN immediate relation between maker of a note and the payee. Bills can be drawn in sets; PN cannot be so drawn.
Specimen of Bills of Exchange
Mumbai, 26th January 2005. Rs. 5,000/SIX DAYS after date, pay to Rahul Gandhi, the sum of five thousand rupees only for value received. Sd/- Milind Deora. To Murli Deora, 30, Mahatma Gandi Road, Mumbai – 400 023.
Mumbai, 26th January 2005. Rs. 5,000/SIX DAYS after date, pay to Rahul Gandhi, the sum of five thousand rupees only for value received. Sd/- Milind Deora. To Murli Deora, 30, Mahatma Gandi Road, Mumbai – 400 023. Accepted Sd/- Rahul Gandhi
Cheque
? ? ? ?
A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. It?s a BE but here the mode of payment is different. This must be drawn on a banker and the payment must be made on demand. All cheques are bills of exchange but all bills of exchange are not cheques. All rules which apply to a BE also apply to a cheque.
?
In case of a cheque, the drawee must always be a specified banker. In the case of a bill of exchange, anybody can be a drawee.
BANK OF MAHARASHTRA Mumbai, 26th January 2005. NO. SB 8008008 PAY TO ABC OR BEARER RUPEES TWENTY THOUSAND ONLY.
Rs. 20,000/SD/- XYZ
doc_469279403.ppt