l8 neogtiable isntruments

concept

• written commercial documents that represent a right to payement

  • owning the document is the same as owning the right to claim the money

  • no document means no legal right

  • the physical paper carriers the legal weight

• essential characteristics

  • formal= must comply with statuatory format rules to be legally valid

  • literal= only what is physically written on the paper matters

    • hidden intents or side agreements are legally void against third parties

  • autonomous= each susbequent holder acquires a clean direct right that is unaffceted by disputes between previous owners

• classification

  • credit instruments= allow for the deferral of payement obligations over time

  • payement instruments= designed strictly for the immediate settlement of obligations on demand

the promissory note

Concept

• a written unconditional promise to pay a specific sum of money made by one party to another

  • it is a unilateral declaration creating a direct principal olbigation to the maker

• unlie other instruments only involves 2 parties at inception

  • the maker who is the debtor who creates the note and promises to pay

  • the payee who is the creditor entitle to recieve the payement

    • cannot be issued to bearer at its birth, must always explictly state the specific name of the first creditor

characteristocs

• credit instrument= finances commercial business to business trasnactions allowing a business to recieve the goods now and pay the supplier later

• enfrocement= easier and faster to enforce than an prdinary invoice

• liqudity= can be easily trasnferred or sold to obtain quick cash

mandatory elements= failure invalidates its status

• the text must include the term promissory note

• an uncoditional promise to pay a defintiive sum of money

• a designated maturity date when it is due

  • if omitted it is presumed to be payable on demand

• location of payement and the specific name of the reciever

  • if location is missing presumed to be the place where the document was issues

• the date and place where the note is issued

• signature of the maker

bill of exchange

concept

• a formal commercial document ordering payement= a written instruction where one party tells another to pay a fixed amount to a third party on a set fture date

• involves 3 main parties

  • the drawer who issue the order to pay

    • guarantees the acceptance of the bill by the drawee

    • guarantees the final payement of tje bill

  • the drawee who has been ordered to pay

    • they are not legally liable for the order until they sign the acceptance clause

    • once accepted they become the principal debtor

    • if they refuse the accept the holder cannot sue them using fast track court peocesses; they must sue the drawer instead by a formal protest

  • the payee= the beneficiary holding the eight ro collect the money on maturity

    • the drawer can name themselves as the payee

characteristics

• credit instrument= allows the buyer to pay later while giving the creditoe a formal roght to future payement

• liqduity= can be trasnferred or discounted to obtain immediate cash

• enfrocement= easier and faster to enforce than an ordinary invoice

mandatory elements

• the text must contain the term bill of exchnage

• an uconditional order to pay a specific designated sum of money

• the name of the drawee

• the maturity date it is due

• the place where the payement must be executed

• the specific name of the payee to payement must be mate too

• the exact date and location the bill is issued

• the signature of the drawer

check

concept

• a written payement prder directy to a bank instructing them to pay a specific amount of money immediately to the person holding the cheque

• involves 3 parties like a bill of exchange

  • drawer= who orders the payement

  • drawee= must always be the licensed bank being ordered to make the payement

  • payee= person holding the cheque demanding payement

    • can be issued ‘to bearer’ meaning whoever physically holds the paper can cash it not a specific person

characteristcs

• payement instrument not credit instruments= always payable on demand immediately upon physical presentation

  • if a check is post dated the dating is legally ignored and the bank must pay it immediately if there are funds available

• cash subsitute=a direct rapid susbitute providing a written record of payement so is dafer for larger transactions

• liqudity= can be trasnferred to another person who may claim payement from the bank

• enforcment= the drawer must maintain suffcient funds for payement so if the check bounces they must pay

  • the full face value

  • an automatic 10% of the unapid amount as damages

  • plus interest

  • plus legal fees

• revocation= drawer cannot immediately cancel a cheque; for the frst 15 days the bank can still pay even if the drawer tells them to stop

mandatory elements

• specific term check in the text

• an unconditional order to pay a definitive sum of money

• the specific name of the bank prdered to pay

• the location where payement must be made

• the exact date and place of issue

• the signature of the drawer

universal rule

court action

• all 3 documents grant the holder access to the executove track in spanish courts

• if any of them bounce you bypass slow ordinary lawsuots and ca ask the judge to instaly freeze and seize the debtors bank account/assets befpre a full trial begins

endorsement

• everytime a document is trasnferred by signing it on the back the person signing becomes a guarantor of payement

• if the document is not paid at the end the holder can claim from ainy previous signer

• it creates a chain of liability

• all signers are jointly and severally liable meaning the holder can sue one some or all of them for the full amount