1. Negotiable Instrument Law
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2. I An Introduction to Negotiable Instrument
1．Definition of Negotiable Instrument
A negotiable instrument, is a written promise or order signed by the maker to pay a specified sum of money on demand or at a fixed future time to the person named on the instrument or to the bearer.
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3. 2. Legal Principles of Negotiable Instrument
An instrument shall be negotiated promptly and easily
An instrument shall be separated from its underlying relationships
An instrument shall emphasize on protecting the bona fide third parties
A negotiable instrument is a formal security
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4. 3. Functions of Negotiable Instrument As a means of payment
As a credit instrument
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5. 1. Definition of a bill of exchange
II Bill of Exchange
1. Definition of a bill of exchange
As defined in the Negotiable Instruments Law of the PRC, a bill of exchange is a bill signed by the drawer, requiring the drawee to make unconditional payment in the fixed amount at sight of the bill or at a fixed date to the payee or the holder.
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6. 2. Parties to a bill of exchange (1)Drawer
The drawer, may be also referred to as an issuer, is the party who draws and signs a bill of exchange on the drawee and delivers it to the payee. He is a debtor to the bill and bears liability to the payee or holder of it. In the event that the drawee dishonors the bill by no acceptance or nonpayment, the drawer must redeem and pay the bill. However, when the bill is accepted, his liability becomes secondary.
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7. (2)Drawee
The drawee, or the payer of the bill of exchange, is the party on whom the bill is drawn and to effect payment to the payee.
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8. (3)Payee
The payee refers to the person shown in the bill of exchange to whom the money is payable.
(4)Endorser
An endorser is the payee or the holder who signs his name on the back of a draft for the purpose of negotiation.
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9. An endorsee is the party to whom the bill of exchange is transferred.
(6)Holder
Holder refers to the party who is in possession of a bill of exchange.
(7)Guarantor
A guarantor is a third party who guarantees a debtor to the bill of exchange to perform his obligations.
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10. III Promissory Note and Cheque
1. Definition of a promissory note
A promissory note is an unconditional promise in writing, made by one person ( the maker) to another (the payee or the holder),signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money, to or to the order of the another person. The maker may be a natural person or juristic person.
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11. 2. Definition of a cheque
As defined in the Chinese bill law, a cheque is an negotiable instrument issued by a drawer, at the sight of which the cheque deposit bank or other financial institution unconditionally pay the fixed amount to the payee or holder. Like a bill of exchange, a cheque also has three basic parties specified on it: the drawer, drawee, payee. But the drawee of a cheque must be a bank or other financial institution.
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