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The Law on Negotiable Instrument


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Definition of Terms


Form and Interpretation

Section 1. Form of Negotiable Instruments

Commercial Paper – a written promises or obligations that arise out of commercial transactions from the use of such instruments as promissory notes and bills of exchange.

Maker – the person issuing a promissory note

Drawer – person issuing bill of exchange

Money - medium of exchange authorized or adopted by a domestic or foreign government as part of its currency.

In literal sense, the term means “cash.” It also includes all legal tender.

Legal Tender – that currency which a debtor can legally compel a creditor to accept a payment of a debt in money when tendered by the debtor in the right amount.

Non-negotiable Instrument – an instrument which is not negotiable, which does not meet the requirements lay down to qualify an instrument as a negotiable one, or an instrument which in its inception was negotiable but has lost its quality of negotiability.

A non-negotiable instrument may not be negotiated but it may assigned or transferred

Negotiable Promissory Note – an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money or to bearer.

It is commonly referred to as a note.

Payee – the party to whom the promise is made or the instrument is payable.

Bill of exchange – an unconditional order in writing addressed by one person to another, signed by the person giving it, and requiring the person to whom it is addressed to pay upon demand or at a fixed or determinable future time a sum certain in money to order or to bearer.

If drawn on a bank and payable on demand, the order bill is by definition called check.

Drawee – the person to whom the bill is addressed and who

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