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KESH. K VI KUNDURU JESWARI JATHA NJINI JASHEKAR KESH JESH

NEGOITABLE INSTRUMENT S

1 Overview 2 Issue on negotiable instrument 3 Endorsement 4 Acceptance 5 Guarantee 6 Payment 7 Dishonor and right of recourse 8 Protection of lost-instrument holders 9 Statute of limitations .

1 Concept • Means of payment • Constitute independent contract embodying a payment obligation and distinct from that of other contracts or transactions by virtue of which such instruments are issued .1 Overview 1.

Parties to bill of exchange A Drawer B Payee Endorser C Endorsee Endorser D Endorsee Bearer P Drawee Secondary debtor Primary debtor E Guarantor Right-holder .

THE UNIFORM COMMERCIAL CODE General contents of the UCC -Articles 3. 4 & 4A are of specific concerns for bank operations .

and Federal charters) • Federal Reserve Bank • Federal Insurance (FDIC) • Charter Grantor & Supervisor – State Banking Depts – OCC (National Banks) – OTS (Thrifts) – NCUA (Credit Unions) • FFIEC & NACHA Rules (Regulatory and industry standards organizations) • Laws versus Regulations .REGULATORY FRAME WORK               • Dual Banking (State.

Legal Authority & Rules                 • United States Code. Title 12 (Banks and Banking): The USC is a consolidation and codification by subject matter of the general and permanent laws of the United States. VISA & M/C. Especially for State Chartered banks & CUs. but can apply to others. • State Banking Laws: Each state has a set of laws or banking code that applies in the state. (Title 12 is specific to banking) • Code of Federal Regulations – The CFR contains regulations issued by executive branch and agencies of the Federal govt. PULSE. • Clearinghouse & Other organizations: Membership in an organization may have other rules that must be followed. . such as NACHA.

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Defenses – Reasons for Nonpayment • Absolute or Real: Available against all types of parties • Types/Examples – Essential Fraud – Lack of Title – Bankruptcy – Forgery – Incapacity – Illegality (mixed) – Alteration (mixed) • Personal Defenses: Not available against Holdersin-due course • Types/Examples – Simple Fraud – Lack of delivery – Lack of consideration – Undue influence – Discharge before maturity – Claims or equities of ownership .

1. drawee.2. payee Banks No On demand ╳ Primary debtor Acceptor Maturity Acceptance On demand Determinable future time √ . promissory note and cheque Promissory note Self payment Bill of exchange Nature Entrusted payment Cheque Entrusted payment Basic parties Payer’s qualification Drawer.2 Comparison Comparison among bill of exchange. drawee. payee No restriction Drawer & payee Drawer Drawer On demand ╳ Drawer.

Parties to promissory note A Drawer B Payee Endorser C Endorsee Endorser D Endorsee Bearer E Guarantor Right-holder Primary debtor Secondary debtor .

Parties to cheque A Drawer B Payee Endorser C Endorsee Endorser D Endorsee Bearer P (Banks) Drawee Right-holder Secondary debtor .

Negotiable instrument relations in bill of exchange and cheque A Drawer B Payee Endorser C Endorsee Endorser D Endorsee Bearer Negotiable instrument relation P Drawee Non-negotiable instrument relation .

Negotiable instrument relations in promissory note A Drawer B Payee Endorser C Endorsee Endorser D Endorsee Bearer Negotiable instrument relation Non-negotiable instrument relation .

8 Protection of lost-instrument holders  If lost before payment is due. lostinstrument holder may apply to court for publication of public notice for assertion of claims  Holder other than the lost-instrument holder comes forward to claim the rights during the foregoing withholding period.  Within 3 days of giving the notice for suspension of payment or after the loss of the instrument. the litigation method shall be utilized . lost-instrument holder may notify drawee to suspend payment.

9 Statute of limitations Statute of limitations Limitation period Bearer’s rights against drawer & acceptor 2 years Sight draft and promissory note Cheque’s bearer against drawer 2 years 6 months Running from Maturity date Issuance date Issuance date Bearer’s recourse against predecessor Right of re-recourse against predecessors 6 months 3 months Date of rejection Payment date or date being sued .