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

Dr AbdelGadir Warsama, Legal Counsel

Your property could either be real or personal property. There are legal points, to understand and how to use your property. Negotiable instruments are among the most important types of personal property. Negotiable instruments, are three kinds, bills of exchange, promissory notes and cheques. The convenience of the use and employment of the bill of exchange is obvious, as it makes credit merchantable. A owes money to B, C is indebted to A, A can draw a bill on C in favor of B, C by accepting the bill “pays” his debt to A. A can “pay” B with the bill, B can pass the bill to a creditor or discount it to a bank, for ready cash less a discount.

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Another aspect of a bill of exchange is that the creditor can be assured of receiving payment in certain day. Above example is, a trade bill, others include finance bills drawn by bank on another for transferring money temporarily. There are treasury and corporation bills enabling them to borrow money usually for certain fixed term. Trade bills are inland or foreign bills. In case of foreign bills, they may have documents attached and stamped as “documents against acceptance”. Herein, the importer of the goods must accordingly accept the bill before he can get the bill of lading and other documents he needs to obtain delivery of the goods off the ship. However, trade bills are now taken by bank overdrafts, cheques and letters of credit.

We can see their importance, particularly, in sale of goods across the world which is now usually arranged by means of confirmed credits. The buyer requests his bank to open a credit in favor of the seller, and in pursuance of that request the bank or his foreign agent issues a confirmed credit in favor of the seller. This credit is a promise by the bank to pay money to the seller in return for the shipping documents. When the seller presents the documents, he gets paid the contract price. In the absence of express stipulation, the credit must be made available to the seller at the beginning of the shipment period. The reason is because the seller is entitled, before he ships his goods, to be assured that on shipment he will get paid. All international trade is benefiting from this established legal process. Law helps trade.

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