Negotiable Instruments

Chapter - 3

Topics Covered in this chapter

OPENING WORDS DEFINITION OF NEGOTIABLE INSTRU ENT ESSENTIAL C!ARACTERISTICS OF NEGOTIABLE INSTRU ENTS PRO ISSOR" NOTE# BILL OF E$C!ANGE AND C!E%UE DIFFERENCE BETWEEN BILL OF E$C!ANGE AND PRO ISSOR" NOTE DIFFERENCE BETWEEN A BILL OF E$C!ANGE AND A C!E%UE !OLDER AND !OLDER IN DUE COURSE DIFFERENCE BETWEEN !OLDER AND !OLDER IN DUE COURSE !OLDER FOR &ALUE PA" ENT IN DUE COURSE SO E RELATED ISSUES

 OPENING WORDS
Ne'otia()e Instr*+ents have 'reat si'ni,icance in the +odern (*siness -or)d. The chie, characteristic o, a ne'otia()e instr*+ent is its ne'otia(i)it/. i.e.# it can (e ne'otiated ,ro+ one person to another. It is a trans,era()e doc*+ent that satis,ies certain conditions. These instr*+ents pass ,ree)/ ,ro+ hand to hand and th*s ,or+ an inte'ra) part o, the +odern (*siness +echanis+. These instr*+ents have 'ained pro+inence as the principa) instr*+ents ,or +a0in' pa/+ent and dischar'in' (*siness o()i'ations. The Ne'otia()e Instr*+ents Act# 1221 is the )e'is)ative enact+ent o, the )a- re)atin' to three c)asses o, ne'otia()e instr*+ents na+e)/ Pro+issor/ Notes# Bi))s o, E3chan'e and Che4*e -hich are in co++on *se in +onetar/ transactions.

DEFINITION OF NEGOTI

!"E INSTR#$ENT

The ter+ 5ne'otia()e instr*+ent6 +eans a -ritten doc*+ent -hich creates a ri'ht in ,avor o, so+e person and -hich is ,ree)/ trans,era()e. The Ne'otia()e Instr*+ents Act states that a 5ne'otia()e instr*+ent6 +eans a Pro+issor/ Note# Bi)) o, e3chan'e or Che4*e pa/a()e either to order or to (earer -hich are trans,era()e ,ro+ hand to hand (/ -a/ o, ne'otiation (*t does not contain -ords prohi(itin' trans,er or indicatin' an intention that it sha)) not (e trans,era()e. E3a+p)e7 I% Pa/ to $ II% Pa/ to $ or order III% Pa/ to $ or (earer8order I&% Pa/ to $ on)/ &% An instr*+ent Crossed# 9Acco*nt pa/ee on)/: Since the instr*+ent d; and e; are not trans,era()e i.e. the -ord on)/ prohi(its ,*rther trans,er and A8C Pa/ee Crossin' indicates the intention that it sha)) not (e trans,era()e# these are e3c)*ded ,ro+ ne'otia()e instr*+ents. Some Important De'initions( ))or*ing to +usti)e ,% C% Willis( 9One the propert/ in -hich is ac4*ired (/ an/ one -ho ta0es it (ona ,ide and ,or va)*e not-ithstandin' an/ de,ect o, tit)e in the person ,ro+ -ho+ he too0 it:

Possi()/ the +ost e3pressive de,inition o, ne'otia()e instr*+ent has (een s*''ested (/ Thomas as< 9An instr*+ent is ne'otia()e -hen it is# (/ a )e'a))/ reco'ni=ed c*sto+ o, trade or (/ )a-# trans,era()e (/ de)iver/ or (/ endorse+ent and de)iver/# -itho*t notice to the part/ )ia()e# in s*ch a -a/ that a- The ho)der o, it ,or the ti+e (ein' +a/ s*e *pon it in his o-n na+e# and b- The propert/ in it passes to a (ona ,ide trans,eree ,or va)*e ,ree ,ro+ an/ de,ect in the tit)e o, the person ,ro+ -ho+ he o(tained it.: E.amples< Bi)) o, E3chan'e# Pro+issor/ Note# che4*es etc.

The prin)ipal parts o' the negotiable instruments are( 1. The Date

>. The A+o*nt ?. Ti+e ,or Pa/+ent @. P)ace o, pa/+ent A. Sta+p

ESSENTI

" C/ R CTERISTICS OF NEGOTI !"E INSTR#$ENTS(

An e3a+ination o, the a(ove de,inition revea)s the ,o))o-in' essentia) characteristics o, ne'otia()e instr*+ents -hich +a0e the+ di,,erent ,ro+ an ordinar/ chatte)< >. Eas0 negotiabilit0( The propert/ in a ne'otia()e instr*+ent is ,ree)/ trans,era()e. It can (e trans,era()e ,ro+ hand to hand (/ -a/ o, ne'otiation. In case o, order instr*+ents# it is trans,era()e (/ endorse+ent and de)iver/. In case o, (earer instr*+ents it is trans,era()e (/ +ere de)iver/. ?. Title( The 5ho)der in d*e co*rse6 is not in an/ -a/ a,,ected (/ the de,ective tit)e o, the trans,er o, an/ part/. The ter+ ho)der in d*e co*rse +eans a ho)der -ho has accepted a ne'otia()e instr*+ent ,or va)*e# in 'ood ,aith and (e,ore +at*rit/. @. Re)o1er0( The ho)der in d*e co*rse is entit)ed to s*e *pon the instr*+ent in his o-n na+e. Th*s# he can recover the a+o*nt o, the instr*+ent ,ro+ the part/ )ia()e ,or pa/+ent on the instr*+ent. A. Presumptions( A ne'otia()e instr*+ent is a)-a/s s*(Bect to certain pres*+ptions. Those -i)) (e app)ica()e *n)ess contrar/ is proved.

 PRO$ISSOR2 NOTE3 !I"" OF E4C/

PRO$ISSOR2 NOTE( *e'inition b0 rules(

NGE

ND C/E5#E

Accordin' to ne'otia()e instr*+ents Act 1221# section @.:A pro+issor/ note is an instr*+ent in -ritin' Cnot (ein' a (an0 note or a c*rrenc/ note; containin' an *nconditiona) *nderta0in'# si'ned (/ the +a0er# to pa/ a certain s*+ o, +one/ on)/ or to the order o, a certain person# or to the (earer o, the instr*+ent.: A pro+issor/ note is dra-n and si'ned (/ the de(tor# -ho pro+ises to pa/ the creditor a certain s*+ o, +one/. The speci+en o, pro+issor/ note is 'iven (e)o-7

T0 2#DDD Three +onths a,ter date i pro+ise to pa/ ,or va)*e received.

Dha0a 11DD? Ath Apri)# >DDE r. !ar*n the s*+ o, Ta0as ei'ht tho*sand#

To

r. !ar*n

Sd.

Sta+p !asan*r Rah+an

A pro+issor/ note +a/ (e dra-n (/ +ore than one person a)so -ho +a/ *nderta0e to pa/ the a+o*nt (oth in their individ*a) capacities as -e)) as Boint)/. The speci+en o, a pro+issor/ note -ith Boint and severa) )ia(i)ities is 'iven (e)o-7 T0 FFFF. Dha0aFFFFF..>DFFF

On de+and -e Boint)/ and severa))/ pro+ise to pa/ toFFFFFFFFFFFFFFFFFFFFFFFF. FFFFFFFFFFFFF. FFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFFF....or order the s*+ o, Ta0as FFFFFFFFFFFFFFFFFFFFFFFFFF............... to'ether -ith interest on s*ch s*+ ,ro+ this date at the rate o, FFFFFFFFFFFFFFF percent per ann*+ -ith FFFFFFFFFF.F rests# ,or va)*e received.

Sta+p CSi'nat*ree across the sta+p; AddressesFFFFF..

Essential re6uirementsThe essentia) characteristics o, a pro+issor/ note +a/ (e s*++ari=ed as ,o))o-s7

1. It +*st (e in -ritin' >. It +*st certain a pro+ise or *nderta0in' to pa/ ?. The pro+ise to pa/ +*st (e *nconditiona) @. It +*st (e si'ned (/ the +a0er A. The +a0er +*st (e a certain person G. The pa/ee +*st (e certain E. The s*+ pa/a()e +*st (e certain 2. The a+o*nt pa/a()e +*st (e in )e'a) tender +one/ H. Other ,or+a)ities !I"" OF E4C/ NGE( De'inition b0 rules Accordin' to ne'otia()e instr*+ents act 1221 section S# 9A (i)) o, e3chan'e is an instr*+ent in -ritin' containin' an *nconditiona) order# si'ned (/ the +a0er# directin' a certain person to pa/ a certain s*+ o, +one/ on)/ to# or to the order o,# a certain person or to the (earer o, the instr*+ent.: That is# a (i)) o, e3chan'e contains an order ,ro+ the creditor to the de(tor to pa/ a speci,ied a+o*nt to a person +entioned therein. The +a0er o, a (i)) is ca))ed the 5dra-er6# the person -ho is directed to pa/ is ca))ed the 5dra-ee6I the person -ho is entit)ed to receive the pa/+ent is ca))ed the 5pa/ee6I so+eti+es the dra-er hi+se), is the pa/ee. The speci+en o, a (i)) o, e3chan'e is 'iven (e)o-7 T0. 1D# DDD T-o +onths a,ter date pa/ to 5 r. va)*e received. Dha0a# ?rd arch >DDE

a+*n6 or order the s*+ o, ta0a Ten tho*sand on)/# ,or

To r. !a(i(*r Rashid >D18A# Dhan+ondi Dha0a

Accepted Sd8< !a(i(*r Rashid

Sta+p d. !asan*r Rah+an

Essential Chara)teristi)s The essentia) characteristics o, a (i)) o, e3chan'e +a/ (e s*++ari=ed as ,o))o-s7

1.

It +*st (e in -ritin'

>. It +*st contain an order to pa/ ?. The order to pa/ +*st (e *nconditiona) @. It +*st (e si'ned (/ dra-er A. The dra-er# dra-ee and pa/ee +*st (e certain G. The s*+ pa/a()e +*st (e certain E. The (i)) +*st contain an order to pa/ +one/ on)/ 2. It +*st co+p)/ -ith the ,or+a)ities as re'ards date# Consideration# sta+ps# etc. C/E5#E( De'inition b0 rules Accordin' to the ne'otia()e instr*+ents act 1221# section G# 9 a che4*e is a (i)) o, e3chan'e dra-n on a speci,ied (an0er and not e3pressed to (e pa/a()e other-ise than on de+and.: It is an i+portant doc*+ent ,or an/ transaction in the (*siness -or)d. Th*s# a che4*e is a (i)) o, e3chan'e -ith t-o distinctive ,eat*res na+e)/< 1; It is a)-a/s dra-n on a (an0 >; It is a)-a/s pa/a()e on de+and Features o' a Che6ue 1; A che4*e is printed paper >; On the printed paper it speci,ies the (an0 and (ranch address ?; It +*st (e in -ritin'

@; A che4*e is a)-a/s dra-n on a (an0er A; A che4*e can on)/ (e dra-n pa/a()e on de+and G; It +*st have a date E; Che4*e no is a)so e3ist 2; It +*st contain an order to pa/ H; It inc)*des an acco*nt no o, o-ner o, the acco*nt ho)der 1D; The order to pa/ +*st (e *nconditiona) 11; The s*n pa/a()e +*st (e certain D*tch<Ban')a Ban0 Li+ited 1>; A che4*e +*st contain an order to pa/ +one/ on)/ Uttara Branch# Dha0a Spe)imen o' a Che6ue C*rrent Acco*nt No.

Date DG8DG8>DDE

. 1

3 6

Pa/ to A(d*))ah A)< ah+*d The s*+ o, Ta0aT-ent/ ,ive tho*sand ta0a on)/

or (earer

Tk. 25,000/=

SB ?HDEA1? A

DIFFERENCE !ETWEEN !I"" OF E4C/

Parti)ulars
1. De,inition

NGE

ND PRO$ISSOR2 NOTE

!ill o' E.)hange

A (i)) o, e3chan'e is an instr*+ent in -ritin' containin' an *nconditiona) order# si'ned (/ the +a0er# directin' a certain person to pa/ a certain s*+ o, +one/ on)/ to# or to the order o,# a certain person or to the (earer o, the instr*+ent.: In a (i)) o, e3chan'e there are three parties Jthe dra-er# dra-ee and pa/ee A (i)) o, e3chan'e is an order ,or +a0in' the pa/+ent Bi)) pa/a()e a,ter si'ht re4*ires acceptance o, the dra-ee (e,ore it is presented ,or pa/+ent The )ia(i)it/ o, dra-er o, a (i)) o, e3chan'e is secondar/ and conditiona) The +a0er or dra-er o, an accepted (i)) stands in i++ediate re)ation -ith the acceptor and not the pa/ee A (i)) o, e3chan'e can (e dra-n pa/a()e to (earer Notice o, dishonor +*st (e

Promissor0 note
A pro+issor/ note is an instr*+ent in -ritin' Cnot (ein' a (an0 note or a c*rrenc/ note; containin' an *nconditiona) *nderta0in'# si'ned (/ the +a0er# to pa/ a certain s*+ o, +one/ on)/ or to the order o, a certain person# or to the (earer o, the instr*+ent. In a pro+issor/ note there are t-o parties J the +a0er o, the note and the pa/ee A pro+issor/ note contains a pro+ise to +a0e the pa/+ent

>. N*+(er o, parties

?. Pro+ise and order

@. Acceptance

Pro+issor/ note does not re4*ire it The )ia(i)it/ o, the +a0er o, a pro+issor/ note is pri+ar/ and a(so)*te The +a0er o, pro+issor/ note stands in i++ediate re)ation -ith the pa/ee A pro+issor/ note cannot (e dra-n pa/a()e to (earer

A. Nat*re o, )ia(i)it/

G.

a0er6s position

E. Pa/a()e to (earer 2. For+a)ities in case o,

dishonor

'iven (/ the ho)der to a)) prior parties -ho are )ia()e to pa/

No notice is necessar/ to the +a0er

DIFFERENCE !ETWEEN

!I"" OF E4C/ NGE

ND

C/E5#E(

A)tho*'h a che4*e# (ein' a c)ass o, a (i)) o, e3chan'e +*st satis,/ a)+ost a)) the essentia)s o, a (i)) e.'. si'ned (/ the dra-er# containin' an *nconditiona) order# to pa/ a certain s*+ o, +one/# to the order o, a person or (earer# etc. "et# there are ,e- points o, di,,erence (et-een the t-o na+e)/< 1. A (i)) o, e3chan'e is *s*a))/ dra-n on so+e person or ,ir+ -hi)e a che4*e is a)-a/s dra-n on a (an0.

>. A che4*e is 'enera))/ *sed ,or in)and pa/+ents (*t a (i)) o, e3chan'e +a/ (e *sed (oth ,or in)and and ,orei'n pa/+ents. ?. Dra-er cannot ho)d the dra-ee )ia()e on a (i)) o, e3chan'e *n)ess the )atter has accepted it. It is essentia) that a (i)) o, e3chan'e +*st (e accepted (e,ore its pa/+ent can (e c)ai+ed. A che4*e does not re4*ire an/ s*ch acceptance. @. A che4*e is a)-a/s pa/a()e on de+and. A (i)) o, e3chan'e +a/ (e pa/a()e on de+and or on the e3pir/ o, a ,i3ed period. A. A che4*e is pa/a()e i++ediate)/ on de+and -itho*t an/ da/s o, 'race (*t in the case o, a ti+e (i)) o, e3chan'e # three da/s o, 'race are a))o-ed ,ro+ the d*e date. G. A (i)) o, e3chan'e +*st (e proper)/ sta+ped. A che4*e does not re4*ire an/ sta+p. E. A (i)) o, e3chan'e +*st (e d*)/ presented ,or pa/+ents or e)se and the dra-er -i)) (e co+p)ete)/ dischar'ed. In the case o, a che4*e# dra-er is dischar'ed ,ro+ )ia(i)it/ on)/ -hen the de)a/ in present+ent has ca*sed hi+ so+e )oss on acco*nt o, ,ai)*re o, the (an0. 2. Un)i0e che4*e# a (i)) o, e3chan'e cannot (e crossed. H. A che4*e dra-n 9pa/a()e to (earer: on de+and sha)) (e va)id (*t a (i)) pa/a()e on de+and can never (e dra-n pa/a()e to (earer. 1D. Un)i0e (i))s o, e3chan'e# che4*es *s*a))/ are not intended ,or circ*)ation (*t ,or i++ediate pa/+ent. 11. Un)i0e che4*es# the pa/+ent o, a (i)) cannot (e cance))ed (/ the dra-er.

 /O"DER

ND /O"DER IN D#E CO#RSE(

/O"DER( De'inition b0 Rule Accordin' to the ne'otia()e instr*+ents Act 1221# section 2# 9ho)der +eans an/ person entit)ed in his o-n na+e to the possession thereo, and to receive or recover the a+o*nt d*e thereon ,ro+ the parties thereto.: The 5 !o)der6 o, a pro+issor/ note# (i)) o, e3chan'e# or che4*e +eans the pa/ee or indorsee -ho is in possession o, it or the (earer thereo, and does not inc)*de a (ene,icia) o-ner c)ai+in' thro*'h a 7(ena+der8 A person is ca))ed the hol*er o, a ne'otia()e instr*+ent# i, the ,o))o-in' conditions are satis,ied7 9 !e +*st (e entit)ed to the possession o, the instr*+ent in his o-n na+e and *nder a )e'a) tit)e. Act*a) possession o, the instr*+ent is not essentia)I the ho)der +*st have the )e'a) ri'ht to possess the instr*+ent in his o-n na+e. For e.ample3 i, a person ac4*ires a che4*e or (i)) (/ the,t# ,ra*d# or ,or'ed endorse+ent or ,inds it )/in' so+e-here# he does not ac4*ire in his o-n na+e )e'a) tit)e thereto and hence he can not (e ca))ed its ho)der. 9 !e +*st (e entit)ed to receive or recover the a+o*nt ,ro+ the parties concerned in his o-n na+e. In case o, an order instr*+ent# it is essentia) that the na+e o, the ho)der appears on the doc*+ent as its Pa/ee or endorsee. B*t in case o, (earer instr*+ent the na+e o, the (earer is not essentia) to (e appeared. In case a (i))# note or che4*e is )ost or destro/ed# the person -ho -as entit)ed to receive pa/+ent at the ti+e the instr*+ent -as )ost# -i)) contin*e to (e re'arded as its !o)der# the ,inder does not (eco+e its ho)der.

/O"DER IN D#E CO#RSE( De'inition b0 Rule Accordin' to the ne'otia()e instr*+ents Act 1221# section H# 9ho)der in d*e co*rse +eans an/ person -ho# ,or consideration# (eca+e the possessor o, a pro+issor/ note# (i)) o, e3chan'e or che4*e# i, pa/a()e to (earer# or the pa/ee or endorsee thereo, i, pa/a()e to order# (e,ore the a+o*nt +entioned in it (eca+e pa/a()e# and -itho*t havin' s*,,icient ca*se to (e)ieve that de,ect e3isted in the tit)e o, the person ,ro+ -ho+ he derived his tit)e.: A person (eco+es a ho)der in d*e co*rse o, a ne'otia()e instr*+ent i, the ,o))o-in' conditions are satis,ied7

1.

The ne'otia()e instr*+ent +*st (e in the possession o, the ho)der in d*e co*rse.

>. The ne'otia()e instr*+ent +*st (e re'*)ar and co+p)ete. ?. The instr*+ent +*st have (een o(tained ,or va)*a()e consideration# i.e.# (/ pa/in' its ,*)) va)*e. @. The instr*+ent +*st have (een o(tained (e,ore it is +at*red. A. The ho)der in d*e co*rse +*st o(tain the instr*+ent -itho*t havin' s*,,icient ca*se to (e)ieve that an/ de,ect e3isted in the tit)e o, the trans,eror.

DIFFERENCE !ETWEEN /O"DER

ND /O"DER IN D#E CO#RSE

Fro+ the de,initions o, the ter+s 5ho)der6 and 5ho)der in d*e co*rse6 -e +a/ derive the ,o))o-in' points o, di,,erence (et-een the+7 1. Consi*eration( The e3istence o, consideration is not essentia) in case o, a ho)der# (*t a ho)der in d*e co*rse o(tains the instr*+ents a,ter pa/in' its ,*)) va)*e. For e3a+p)e# i, a Che4*e is iss*ed to provide a 'i,t or donation to a charita()e tr*st# the tr*st does not (eco+e its ho)der in d*e co*rse. On the other hand# t*ition ,ee paid to a schoo) or co))e'e is ,or a va)*a()e consideration. !ence the schoo) or the co))e'e ac4*ires the stat*s o, ho)der in d*e co*rse.

>. Possession( The person entit)ed to (e ca))ed ho)der in d*e co*rse +*st (eco+e the possessor o, the instr*+ent (e,ore it (eca+e pa/a()e. For e3a+p)e# i, a (i)) o, e3chan'e is pa/a()e on arch >D# >DDE# a person -ho possesses it (e,ore this date is entit)ed to (e its ho)der in d*e co*rse. In case o, a ho)der neither act*a) possession nor an/ ti+e )i+it -ithin -hich it +*st (e ac4*ired is re4*ired. ?. De'e)t in the trans'eror:s title( The +ost i+portant point o, di,,erence is that a ho)der in d*e co*rse ac4*ires an instr*+ent -itho*t havin' s*,,icient ca*se to (e)ieve that an/ de,ect e3isted in the tit)e o, the trans,eror. This condition is not essentia) in case o, a ho)der. E.ample3 A de(t is d*e ,ro+ a partner o, a ,ir+ to 4. The partner endorses in ,avor o, 4 a che4*e dra-n in ,avor o, the ,ir+. The circ*+stances o, the case 'ive rise to do*(t a(o*t the tit)e o, the partner to the che4*e dra-n in ,avor o, the ,ir+. I, 4 satis,ies hi+se), a(o*t the partner6s va)id tit)e to the che4*e he (eco+es its ho)der in d*e co*rse.

10

 /O"DER FOR &

"#E(

The ne'otia()e instr*+ents act does not de,ine the ter+ 9ho)der ,or va)*e:. In En')and# accordin' to the (i))s o, e3chan'e act# -here va)*e o, a (i)) has at an/ ti+e (een 'iven# its ho)der is dee+ed to (e a ho)der ,or va)*e as re'ards the acceptor and a)) parties to the (i)) -ho (eca+e parties prior to s*ch ti+e. The person# -ho c)ai+s hi+se), as the ho)der ,or va)*e# need not hi+se), 'ive va)*e. It +a/ (e 'iven (/ prior part/. E.ample( A (i)) is dra-n pa/a()e to r. Asad# -ho trans,ers it to r. Rah+an ,or va)*e. r. Rah+an trans,ers it to r. Sa+ad -itho*t consideration. r. Sa+ad is ca))ed ho)der ,or va)*e. !e can s*e r. Asad on the (i)) i, it is dishonored.

2$ENT IN D#E CO#RSE( De'inition b0 Rule

The pa/+ent o, a ne'otia()e instr*+ent sho*)d (e +ade to the ri'ht person (/ the pa/in' (an0er or the acceptor o, the (i))I other-ise the )atter sha)) (e responsi()e ,or the sa+e. The ne'otia()e instr*+ents Act provides protection to the pa/in' (an0er or the dra-ee o, a (i))# provided the pa/+ent is +ade as re4*ired in the Act. S*ch pa/+ent is ca))ed 5pa/+ent in d*e co*rse6. Accordin' to the ne'otia()e instr*+ent act 1221# section 1D# 9pa/+ent in d*e co*rse +eans pa/+ent in accordance -ith the apparent tenor o, the instr*+ent in 'ood ,aith and -itho*t ne')i'ence to an/ person in possession thereo, *nder circ*+stances -hich do not a,,ord a reasona()e 'ro*nd ,or (e)ievin' that he is not entit)ed to receive pa/+ent o, the a+o*nt therein +entioned.: The essential 'eatures o' a pa0ment in *ue )ourse are as 'ollo;s( 1. The pa/+ent sho*)d (e +ade in accordance -ith the apparent tenor o, the instr*+ent.

>. The pa/+ent sho*)d (e +ade in 'ood ,aith and -itho*t ne')i'ence. ?. Pa/+ent +*st (e +ade to person -ho has the act*a) possession o, the instr*+ent. Person +a0in' the pa/+ent +*st insist on seein' the instr*+ent (e,ore pa/+ent and o(tain its de)iver/ to hi+ on pa/+ent. @. Pa/+ent sho*)d not (e +ade *nder circ*+stances -hich a,,ord reasona()e 'ro*nd ,or (e)ievin' that the person -as not entit)ed to receive the a+o*nt +entioned in the instr*+ent.

11

 SO$E RE"

TED ISS#ES

BEARER7 Bearer +eans a person -ho (/ ne'otiation co+es into possession o, a ne'otia()e instr*+ent# -hich is pa/a()e to (earer. DEFECTI&E TITLE7 A person -ho receives an instr*+ent -hich has (een )ost or (/ +eans o, ,ra*d or an/ other *n)a-,*) +eans is not entit)ed to receive the a+o*nt d*e there on *n)ess he c)ai+s as ho)der in d*e co*rse. LIABILIT" OF T!E DRAWER7 The dra-er o, the ne'otia()e instr*+ent -i)) re+ain responsi()e to the pa/ee ti)) it is paid o,,. LIABILIT" OF PRIOR PARTIES TO !OLDER IN DUE COURSE7 Ever/ prior part/ to a ne'otia()e instr*+ent is )ia()e thereon to a ho)der in d*e co*rse *nti) the instr*+ent is d*)/ satis,ied.

12