Chapter 2

1. Chapter 2 Instruments 专业PPT/商演示设计制作

2. Review • Question 1 : • What’s the meaning of international settlement? • Question 2 : • How about the evolution of international settlement? • Question 3 : • How to establish a correspondent banking relationship?

3. In a narrow sense, a instrument is a written document that contains an unconditional promise by the drawer to pay the payee or an unconditional order by the drawer to the drawee to pay the payee a fixed amount of money at a definite time. In this chapter, we focus on the narrow sense instruments: bills of exchange, promissory notes and cheques. What is a instrument?

4. Characteristics of instruments Negotiability Non-causative nature Characteristics Requisite in Form Unconditional promise or order to pay Presentment Returnability

5. What is a bill of exchange ?

6. 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 to pay on demand, or a fixed or determinable future time a sum certain in money to or to the order of a specified person , or to bearer (the payee). What is a bill of exchange ?

7. What is a bill of exchange ?

8. Essentials to a bill of exchange 1、The word “exchage” 4、Date and place of issue 6、Name of payee 2、An unconditional order & 3、Pay a fixed amount of money 5、Name and address of drawee 7、Signature of drawer

9. drawer--the person giving the order to pay drawee--the person to whom the order is addressed payee---the person to whom the sum certain money is paid. Basic parties Derivative parties Parties to a bill of exchange • Endorser-- a payee or a holder who signs his name on the back of a bill of the purpose of negotiation • Endorsee-- the party to whom the instrument is transferred • Guarantor--the person who guarantees the payment or acceptance of an instrument • Acceptor--the drawee that has accepted a usance bill • Holder– the person who possesses an instrument

10. Parties to a bill of exchange • what is the relationship of these parties in a bill • Of exchange ? • How do these parties act to a bill of exchange?

11. Drawee Guarantor drawer Endorsee (Holder) Acts relating to a bill of exchange • Sight bill Endorsee (Endorser) Payee (Endorser) issue Endorse Endorse present

12. Acts relating to a bill of exchange • Issue：to issue a draft comprises two acts to be performed by the drawer. one is to draw a draft and sign it, the other is to deliver it to the payee. • Endorsement: is made on the back of a bill of exchange. It is an act of negotiation and comprises two acts: one is to sign on the back of a draft, the other is to deliver it to the endorsee.

13. Acts relating to a bill of exchange Types of endorsement 1、Special endorsement（Endorsement in full） Special endorsement specifies the person to whom or to whose order the bill is to be payable in addition to the signature of the endorser. Example: Pay to the order of D company For B company, shanghai Signature 2、 Blank endorsement It shows an endorser’s signature only and specifies no endorsee. If the bill is to be further transferred, mere delivery is required. Example: For A Co., London Signature

14. Acts relating to a bill of exchange Types of endorsement 3、Restrictive endorsement It will prevent the further negotiation of a bill. Example:Pay to A bank only/ Pay to A bank not negotiable For B company, shanghai Signature 4、 Conditional endorsement Example:Pay to the order of B Co. On delivery of B/L No.125 For A Co., London (Signature) 5、 Endorsement for collection Example:Pay to the order of D bank for collection

15. Acts relating to a bill of exchange • Presentation：Presentation is to be made by the holder to the person designated as drawee for payment if it is a sight bill and for acceptance and payment if it is a time bill. --Sight draft: Presentation for payment -- Time draft: Presentation for acceptance presentation for payment

16. Acts relating to a bill of exchange • Acceptence：acceptance of a bill is the signification by the drawee of a time bill of his assent to the order of the drawer. --General acceptence ( unconditional acceptence) --Qualified acceptence: conditional acceptence partial acceptence local acceptance qualified acceptence as to time

17. Acts relating to a bill of exchange • Payment: payment of a sight bill is made when the bill is presented to the drawee and payment of a time bill is made at maturity. -- Paid by payee and acceptance, not by endorser or drawer in recourse. -- Paid at maturity, not before it. -- Paid to holder in good faith, meaning that prior endorsements are real and continuous. • Dishonor: a failure or refusal to make acceptance on or payment of a bill of exchange when presented to the drawee

18. Acts relating to a bill of exchange • Recourse: that the holder of bills of exchange has the right to claim compensation from the drawer and the endorsers in the event that the bill has been dishonored. When a bill is dishonored, the right of recourse will be accrued to the holder at once. -- the holder must give notice of dishonor to the drawer and all the endorsers for whom the holder may wish to make liable. -- Protest is a formal certificate given by a notary party or other authorized person to evidence that a bill of exchange has been dishonored

19. Acts relating to a bill of exchange • Gurantee: gurantor engages that the bill will be paid on presentment or accepted on prensentment and paid at maturity. • Acceptence for honour supra protest : When bill is dishonored by non-acceptance, the non-debtor accept the dishonored bill with consent of holder in an attempt against recourse and vindicate the credit of drawer and endorser. • Payment for honor

20. Classification of a bill of exchange • According to thedrawer: Banker’s draft and trader’s draft • According to theacceptor: Banker’s acceptance and trader’s acceptance • According to thetenor: Demand draft/sight draft and time/usance draft • According to whether commercial documents are attached thereto Clean draft and documentary draft

21. What is a promissory note

22. What is a promissory note • A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to bearer.

23. Essentials to a promissory note • The word “promissory note” An unconditional promise to pay • Name of the payee Signature of the maker • Place and date of issue Tenor • A sum certain in money Place of payment

24. Trader’s Note (Maker is a firm or a trader) *trader’s low creditworthiness Bank’s Note (Made by a bank payable to a specified person can be deemed as cash) *commercial banks can only issue notes payable to a specified person International Money Order (Denominated in US dollars with the maximum amount not exceeding USD2500) Types of notes

25. Trader’s Note (Maker is a firm or a trader) *trader’s low creditworthiness International Money Order (Denominated in US dollars with the maximum amount not exceeding USD2500) Central Banker's Notes Negotiable certificates of deposit Various bonds Types of notes

26. Treasury Bill (Government bond with the maker to be the Ministry of Finance) Types of notes

27. Traveler’s Cheque(It is drawn by the issuing bank upon itself payable to a traveler) Types of notes

28. Bank’s Note(Made by a bank payable to a specified person can be deemed as cash) *commercial banks can only issue notes payable to a specified person Types of notes

29. difference between a bill and a note A bill A Note • an order to pay • three parties • time bill needs acceptance • drawn in set in • case of loss • a promise to pay • two parties • time note needs not • Acceptance • drawn in one original • only

30. What is a cheque

31. What is a cheque • A cheque is an unconditional order in writing addressed by the customer to a bank signed by that customer authorizing the bank to pay on demand a sum certain in money to or to the order of a specified person or bearer.

32. Essentials to a cheque • The word “Cheque” • Unconditional • Writing • Signed

33. According to the order *Demonstrative order; Restrictive order; Bearer order According to the Drawer *Banker’s cheque; Personal cheque According to whether or not the Cheque is Crossed *Open cheque; Cross cheque Types of cheque

34. difference between a bill and a cheque • Can be drawn on any one • time and sight • Present on due date • Can only be drawn on banker • Only on demand • Present within prescribed date

35. Preview • what is the difference among a bill of exchange, • A promissory note and a cheque ? • To find some ways for a trader to get finance by • making use of a bill of exchange against which • he can receive payments before due date?

36. Thank YOU