NEGOTIABLE INSTRUMENTS-BILLS OF EXCHANGE

1.0. INTRODUCTION

In this study unit, we introduce the student to Negotiable Instruments-the main instruments with which legally binding transactions are carried out in today’s world of business. In the olden days, trading as well as settlement of debt was effected by exchanging goods for goods in a system known as trade by barter. Due to numerous problems associated with this practice, modern money was invented and goods and services are now exchanges for money. An example of a Negotiable

Instrument as a Bill of Exchange whose importance locally and internationally will be discussed.

2.0 OBJECTIVES

After going through this Unit, the student should be able to:

1. Explain what a Bill of Exchange means 
2. List the parties to the Bill 
3. Distinguish an Order Bill from a Bearer Bill 
4. Explain the acceptance of a Bill 
5. Discuss the discharge of a Bill 
6. List the different types of a Bill of Exchange 

3.0 MAIN CONTENT

3.1 Negotiable Instrument

A negotiable instrument is defined as financial instrument which the full legal title is transferable by mere delivery or by endorsement and delivery with the effect that its complete ownership and legal interest pass to transferee who will be capable of having legal title superior to the title of the transferor provided he takes the instrument complete and regular on the face of it, before it is overdue, in good faith and for value.

The Characteristics of a Negotiable Instrument are as follow:

1. Transferability: The instrument must be transferable by delivery or by delivery and endorsement. 
2. Notice: No notice of transfer of title is required to be given to any person liable on the instrument before the transferee establishes his title. 
3.  Legal title: This passes to the person who takes it in good faith and for value and without notice of any defect in the title of the transferor. 
4.  The Holder: The holder for the time being can sue in his own name. This means that anybody who is a bona-fide holder of a negotiable instrument can sue in as its legal owner. 
5.  Title: Title passes free from equities of transferee has no notice. That is, the right owner of the instrument to the restoration of cannot be enforced against the transferee. Examples of Negotiable Instrument are:  Bills of Exchange  Cheques  Bearer Bonds  Bearer Debenture  Treasury Bills  Promissory Notes  Bankers draft  Dividend Warrants  Bank Notes etc. 

Conversely, postal orders, Debentures or share I.O.Us, Insurance Policies etc. are not negotiable
because they do not possess attributes of Instruments.
3.2 Definition of a Bill of Exchange his capacity which the of the true his property certificates, instruments Negotiable The Bill of Exchange Act 1990 defines bills of exchange as an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed determinable future time, a sum certain in money to or to the order of a specified person or bearer