Professional Documents
Culture Documents
CONTENTS
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Negotiable Instruments
NEGOTIABLE INSTRUMENTS
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Monetary instruments facilitate trade and commerce A formal legal document which contains a legal
(ownership) from one person to another in a document evidencing a contractual obligation to pay money.
Bills of Exchange Cheques Promissory Notes Banker's draft, bank notes Treasury bills
Share warrants
Dividend warrants Debentures Traveler's cheques
Bankers acceptance
Negotiable certificate of deposit
BILLS OF EXCHANGE
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by one person to another signed by the person giving it, requiring the person to whom it is addressed 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.
Cheque is by definition a BOE.
TERM
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CHARACTERISTICS OF BOE
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Unconditional Order
In writing
Addressed by one person to another Signed by the person giving it
future time A sum certain in money To or to the order of specified person or to bearer
UNCONDITIONAL ORDER
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Must be unconditional. Palmer v Pratt An order to pay at 30 days after the arrival of the ship was conditional. See also Cooperative Exportvereniging Vecofa UA
IN WRITING
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SIGNATURE
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Signature is vital
Liabilities are depending on this requirement
Mandate
Ordinary cheques: payable on demand Some cheques: payable at a fixed or determinable
future time
To specified person: Must be named and certain To bearer: simply paid to the bearer without
cash or order
CHEQUES
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demand.
ISSUING CHEQUES
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form, to a person who takes it as a holder. Mere signing and fills in the blanks, not a valid cheque. Section 2 defines holder as the payee or indorse of a bill who is in possession of it/bearer. Payee is the person to whom the cheque is drawn payable Indorse is the person to whom the cheese is made payable by a special indorsement. Section 2 defines delivery- transfer of possession, actual/constructive from one person to another Section 21(2)- delivery may be conditional or for a special purpose only. It is not for the purpose of transferring the property in the cheque.
DATING A CHEQUE
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issue.
Postdated cheque: dated later than the date of issue.
POSTDATED CHEQUE
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NEGOTIATION OF CHEQUES
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negotiation Section 8(4)- a cheque payable simply to a specified person without the addition of the words or order is negotiable in the usual way Section 81A : a cheque crossed account payee/AC payee shall not be transferable but shall only be valid between the parties. Section 31(1)
i. ii.
Payable to bearer: negotiated by delivery alone Payable to order: negotiated by the indorsement of the holder completed by the delivery
CROSSING ON CHEQUES
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exercise caution in the payment of cheques. General Crossing:- S76(1) a crossing 1. an addition to a cheque 2. made across its face and by means of two parallel transverse lines.
INDORSEMENT
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Section 34(1) Blank indorsement Section 34(2) special indorsement Section 32(a) 82 of the Bills of Exchange Act the
signature of the holder or of his duly authorized agent is essential to the validity of indorsement Section 32(b) partial indorsement, does not operate as negotiation of an instrument Section 32(d)- he may indorse the instrument as described- he may add, if he thinks fit, his proper signature See Arab Bank Ltd. v Ross [1952] Court of Appeal: the omission of the word company made the indorsement irregular
WHAT IS INDORSEMENT?
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Every signature written on the back of such instrument is an indorsement Ordinary legally meaning is the signing of a name on the back of an instrument (intention to take liabilities of an indorser) Last-named sense followed by delivery
INDORSEMENT
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INDORSEMENT
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Construction Sdn Bhd Tai, was a customer to UAB and had opened an account at UABs branch in KL. UABs account clerk who was not an authorized signatory to cheques, forged several cheques of Tai. All these cheques were honoured by UAB and Tais account with it was debited in consequences. Tai brought an action against UAB after forgery was discovered. Issue: whether banker should be held liable?
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probabilities Liability of a bank for payment on forged instruments of its customers is founded on the tort off conversion, tort of strict liability Duties of a customer
a) b)
to refrain from drawing a cheque which may facilitate forgery to inform the banker of any forgery of a cheque as soon as the customer becomes aware of it.
CHEQUES
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Section 2, 3 13, 20, 21, 31, 34, 35 & 73, 82 Bill of Exchange Act Lien Chung Credit & Leasing Sdn Bhd v Chang Chin Choi [1994] 3
MLJ 488 National Bank v Silke [1891] 1 QB 435 Arab Bank Ltd v Ross [1952] 2 QB 216 United Asian Bank Bhd v Tai Soon Heng Construction Sdn Bhd [1993] 1 MLJ 182 Marfani & Co Ltd v Midland Bank Ltd [1968] 2 ALL ER 573 Brown v Westminster Bank Ltd [1964] 2 Lloyds Rep 187 Tina Motors Pty Ltd v Australia & New Zealand Banking Group Ltd [1977] VR 205 Syarikat Islamiyyah v Bank Bumiputra Malaysia Bhd [1988] 3 MLJ 218 Tai Hing Cotton Mill Ltd Liu Chong Hing Bank Ltd [1985] 3 WLR 317
CHEQUES
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Holder of a Cheque Section 2, 34, 77, 69, 35, 38 (a), 49 Bill of Exchange Arab Bank Ltd v Ross [1952] 2 QB 216
CHEQUES
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Holder in Due Course Section 24, 27, 29, 55, 95 Bill of Exchange Re Jones v Waring and Gillow Ltd [1926] AC 670 Midland Bank Ltd v Reckitt [1933] AC 1
CHEQUES
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Defences to a Claim on a Cheque Section 27, 30, 74, 49, 50, 22, 21, 24, 64 Syarikat Islamiyyah v Bank Bumiputra Malaysia Bhd [1988] 3 MLJ 218 Kepitigalla Rubber Estates Ltd v National Bank of India Ltd [1909] 2 kb 1010 Tai Hing Cotton Mill Ltd v Liu Chong Hing Bank Ltd & Ors [1985] 2 Lloyds Rep 313 Greenwood v Martin Bank Ltd [1932] 1 KB 371 Bird & Co (London) Ltd v Thomas Cook & Son Ltd [1937] 2 ALL ER 227
CHEQUES
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Fraud Section 17 Contracts Act 1950 Saunders (Excutrix of the Will of Rose Maude Gallie, deceasd v Anglia Building Society [1971] AC 1004
CHEQUES
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CHEQUES
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Colletion of Cheque
CHEQUES
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CHEQUES
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Claims by Third Parties against Collecting Bankers I. Claims at common law II. Claims in equity