Chapter Seven

1. Chapter Seven The Law of Negotiable Instruments

2. Teaching Aims Introduction to the Law of Negotiable Instruments; 1 The legal nature, characteristics and types of negotiable instruments. 2 Understand the systems of offer, endorsement, notice, acceptance, and etc. 3 Master the differences of the three: bill of exchange, promise notes and checks 4

3. Key Words & Expressions Definition of Negotiable Instruments A negotiable instrument is a chose in action, the full and legal title to which is transferable by delivery of the instruments (possibly with the transferor’s endorsement) with the result that complete ownership of the instrument and all the property it represents passes from free equities to the transferee, providing the latter takes the instrument in good faith and for value.”

4. Billof Exchange A bill of exchange is an unconditional order in writing, addressed by one person (the Drawer) to another (the Drawee ), signed by the person giving it, requiring the person to whom it is addressed (the Drawee, who when he signs becomes the Acceptor) to pay on demand, or at a fixed or determinable future time, a sum certain of money, to or the order of specified person, or to bearer (the payee).

5. Uses of bills of exchange Bills of exchange are frequently used in commerce, in various ways. Some of the most important ways are discussed here. Importing and exporting goods 1. Discounting 2. Borrowing money 3. Settling debt Teaching Contents

6. Promissory Note A promissory note is an unconditional promise in writing made by one person (the maker) to another (the payee or the holder) signed by the maker engaging to pay on demand or at a fixed or determinable future time a sun certain in money to or to the order of a specified person or bearer. The only difference between a promissory note and a bill of exchange is that the maker of a note promises to pay the payee personally, rather than ordering a third party to do so.

7. Negotiation 1. Negotiating order paper; 2. Negotiation bearer paper; 3. Converting order to bearer paper and bearer to order paper; 4. Qualified endorsement; 5 Restrictive endorsement; 6. Conditional endorsement.

8. Check A check is an unconditional order in writing addressed by the customer (the drawer) to a bank (drawee) signed by that customer authorizing the bank to pay on demand a specified sum of money to or to the order of a named person or to bearer (the payee)

9. Duties of banks and customers（Paying bank） Stale check Notice Fraudulent alteration Crossed check False endorsement Forged signature

10. Exercises

11. 1. Judge whether the following statements are true or false 1) A bill of exchange on which the drawee is a bank is a time bill. 2) A certificate of deposit is a promissory note on which the maker is a bank. 3) Checks are always payable on demand. 4) The only difference between a promissory note and a bill of exchange is that the maker of a note promises to pay the payee personally, rather than ordering a third party to do so.

12. 2. What are the main uses of bill of exchange? 3. There are three primary parties to a bill of exchange. Name and briefly describe these parties. 4. What is the role of banks in collecting and paying negotiable instruments? 5. Barnes made out a check payable to the order of Williams. The amount written in figures was “$10.00”; the amount written in words was “One hundred and 00/100 dollars”. What amount is negotiable?