NEGOTIABLE INSTRUMENTS
Evolution & Revolution of Negotiable Instruments [/b]
which have Transformed the Commercial World into a [/b]
Virtual Single Global Peace[/b]
CONTENTS
PAGE NO
Evolution Of Negotiable Instruments
2[/b]
What Are Negotiable Instruments
7[/b]
Types Of Negotiable Instruments
11[/b]
Difference Between Negotiable Instruments
22[/b]
Features Of Negotiable Instruments
23[/b]
Negotiation Of Commercial Paper
25[/b]
Exceptions Of Negotiable Instruments
27[/b]
1. EVOLUTION OF TRADE AND COMMERCE LEADING TO THE INTRODUCTION OF NEGOTIABLE INSTRUMENTS.
The world as a whole has been the “cradle of commerce” because this exchange is not only between individuals but also between peoples and nations. This naturally implies the existence of:
1- CERTAIN SURPLUS OF WEALTH
2- CERTAIN PROVISION FOR COMMUNICATION
Both of which are essential for growth of commerce. Unless there is a surplus of wealth and provision for communication, commerce cannot grow.
EXAMPLE- In the primitive economic society when each tribe or family produced all that is needed and consumed all that it produced, need of commerce did not and could not arise. Only after the division of labour and consequent development of exchange, commerce began to grow. Once it started growing, it spread its invisible thread throughout the length and breadth of the world leading to its present day complex mechanism. These stages may be summarized as follows:
1. [/b]NON EXISTENCE OF COMMERCE- In the early stage of economic life of man division of labour scarcely existed. Man produced what he needed and consumed all that he produced. Therefore commerce did not exist in this stage.
2. [/b]TRADE IN THE FORM OF BARTER- In the second stage, wants of the family became more numerous and many families found themselves with certain goods and surplus and deficient in certain other goods. These families wanted to exchange their surplus goods for those goods which they did not possess. This gave rise to “exchange of goods for goods, i.e., Barter system. Thus this is the place from where commerce may be said to have begun.
3. [/b]MONEY AS A MEDIUM OF TRADE AND TOWN AS THE CENTRE OF TRADE- Commerce reached into its third stage of growth when money was evolved as medium of exchange to remove the limitations of barter. Introduction of money began led to the extension of division of labour and specialization. People began to produce goods for certain local markets. Thus, division of labour was extended to a locality. Gradually a separate class of artisans and traders came into existence. They settled down at fixed places which came to be known as towns.
Growth of these towns gave great stimulus to commerce. The size of the market and the number of commodities exchanged in the market, both increased. Traders from other countries brought luxury articles, metals and ornaments for sale.
4. ECONOMY AND GROWTH OF COMMERCE- Commerce continued to grow both in volume and space. After the decline of Guild system, a new class of people, ENTERPRENEUR class, came into existence. This class of people became a real intermediary between the producers and consumers. Further, growth of commercial enterprise took place. Trade began to assume fixed forms. Production began to be undertaken for the markets extended for the whole country. Division of labour received further impetus. Production was divided into several branches and each branch tended to be localized. Various economic activities came to be clearly marked off into distinct groups:
A- AGRICULTURE
B- TRADE
C- COMMERCE.
WORLD ECONOMY AND THE WORLD MARKET- Commerce entered into another stage of its growth when nations of the world were brought into commercial relationships through the invisible thread of trade. As a result of the geographical discoveries of the late 15th, 16th and 17th centuries new trade routes were opened up and commerce grew between nations. Now, in addition to the local market and the trade extending over the whole area of a single country, commodities came to be sold and purchased between traders from different countries in the world. This gave rise to an international world market and to the international trade. Thus the nations of the world were linked together through the medium of the world market.
Evolution of commerce is a never ending process. Almost every day new experiments in its mechanism are made. New forms and methods are being evolved in both socialist and capitalist countries, in both developed and developing nations.
WHY WAS IT NECESARRY TO INTRODUCE NEGOTIABLE INSTRUMENTS?
Historically business developed by stages.
(1) Pastoral stage (2) Agricultural stage (3) Handicrafts stage (4) Guild stage (5) Domestic stage and (6) Factory stage.
Pastoral stage: In primitive society man used things just as they were found in nature. With time, he learned to domesticate animals and breed them for food and clothing. Since he had to find pastures for his animals, he tended to lead a wandering life. But in this stage his work served mainly to support only him with his own needs and left very little surplus available foe exchange on a business basis.
Agricultural stage: In course of time, the nomadic tribes settled permanently at fixed places, built up the huts and shelters for their residences and began cultivating the land in common. Growing corns, grasses etc. became the main occupation. Agriculture emerged as the basic feature of economic living of man. He gradually produced more and then started to exchange it with other commodities. This was known as barter system.
Handicraft stage: In this stage manufacturing was limited to the human efforts to transform raw materials into finished goods. It included candle and soap making, spinning, weaving, making of clothes and shoes, blacksmithing, leather dressing, carpentry etc.