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Unit 10: Negotiable Instruments

Notes
plaintiff assignee was entitled to enforce the note whether it was lost, destroyed, or stolen.
Ultimately the evidence was clear that the note was genuine, the fact of the destruction of
the original did not make it unenforceable either by the maker of the note, Wachovia, or
by the assignee, Atlantic.

Question
What implications does this have in the greater financial industry and banking sector?
Source: http://pklawyers.wordpress.com/2008/11/23/enforceability-of-lost-or-destroyed-negotiable-
instrumentscommercial-paper/

10.6 Summary

Negotiable instruments are written orders or unconditional promises to pay a fixed sum
of money on demand or at a certain time

A cheque is a document that orders a payment of money from a bank account.
Check that is returned unpaid by the bank on which it was drawn due to lack of sufficient
funds. To knowingly issue a check that will be dishonoured is a criminal offence in many
jurisdictions.
Section 123 of the Act refers to general crossing as- “Where a cheque bears across its face
two traverse lines with or without the words or the words ‘not negotiable, the cheque is
said to have been crossed generally. Where a cheque is crossed generally, the banker shall
not pay it, otherwise than to the banker”
Section 124 of the Act refers to Special crossing as- “Where a cheque bears across its face in
addition to the name of the banker either with or without the words or the words ‘not
negotiable, then the cheque is said to have been crossed specially. The object of special
crossing is to direct the banker to pay the cheque only if it is presented through the
particular bank mentioned.”

A cheque is said to be doubly crossed when it bears 2 separate special crossings. As per
section-127, “where a cheque is crossed specially to more than one banker except when
crossed to an agent for the purpose of collection, the banker on whom it is drawn shall
refuse payment thereof.”
Cheque has 3 parties : Drawer, Drawee and Payee
The act of signing a cheque for the purpose of transferring it to somebody else is known as
“Endorsement”.
A non-interest-bearing written order used primarily in international trade that binds one
party to pay a fixed sum of money to another party at a predetermined future date.
A promissory note is a term used for a legal document that declares the intention of an
individual or an entity to pay an amount on demand or at a specified time.

A holder is an individual who is in possession of an instrument that is either payable to
him or her as the payee, endorsed to him or her, or payable to the bearer. Those who
obtain instruments after the payee are holders if such instrument is either payable to the
bearer or endorsed properly to their order. The party in possession is not considered to be
the holder in a case in which a necessary endorsement has been forged.
A Collecting banker is the one who attempts to collect different types of instruments
representing money in favour of his customer or his own behalf from the drawers of these
instruments

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