LEGAL PERSPECTIVE: Concept of Negotiable Instruments by Dr AbdelGadir Warsama, Legal Counsel

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Dr AbdelGadir Warsama, Legal Counsel

In personal property, the transfer or possession of ownership involves many legal difficult issues. We possess and or transfer items from hand to another, however, many times we are not aware of some legal repercussions related to what we have done. We refer here to the ancient basic legal rule “nemo dat rule”.  This Latin rule literally means, „no one gives what they do not have“. In other words, the purchase of a possession from someone who has no ownership right to it also denies the purchaser any ownership title, “one cannot transfer to another more rights than they have“. The rule stays valid even if the purchaser is a bona fide and does not know the seller has no right to claim ownership of the object of the transaction.

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By time, due to many reasons including new developments in trade transactions, some exceptions came to the old Latin maxim “nemo dat rule”. This general basic rule is there all through, but there are some exceptions. One of the main exceptions to the general rule comes from negotiable instruments. Herein, it would be important to mention that the concept of negotiable instruments took long time to reach the current stand and status. A negotiable instrument is a document evidencing the right to claim definite money to which the law attributes the quality of negotiability. Legally speaking, a negotiable instrument is identified by three elements including, it is transferable by delivery if payable to bearer or by delivery coupled with endorsement if to order, the giving of consideration is presumed, a transferee taking in good faith and for value acquires a good title despite defects in, or lack of, title in the transferor.

Accordingly, negotiable instruments constitute the primary and the most important exception to the rule “nemo dat quod non habet”. It follows that the transferee of a negotiable instrument in a proper case takes free from all equities and no notice is necessary to the persons liable on the instrument. Other exceptions to follow.

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