Negotiable Instruments Law

CHAPTER XVI: PROMISSORY NOTES AND CHECKS

I. Definition

„X STALE CHECK ÐŽV is one which has not been presented for payment within a reasonable time after its issue. It is valueless, therefore, should not be paid.

„X CERTIFICATE OF DEPOSITÐŽV is a written acknowledgement by a bank of the receipt of money on deposit which the bank promises to pay the depositor, bearer, or to some other person, to the order of the depositor, or to him, or his order.

„X TRAVELERÐŽ¦S CHECK ÐŽV is one upon which the holderÐŽ¦s signature must appear twice, one to be affixed by him at the time it is issued and the second or counter-signature, to be affixed by him n the presence of the payee before it is paid, otherwise it is incomplete.

„X BOND ÐŽV is an evidence of indebtedness issued by a public or private corporation, promising to pay a sum of money on day certain in the future time.

II. Discussions

1. Give four differences between a check and an ordinary Bill of Exchange.

Check Ordinary BOE

Always drawn on a bank May or may not be drawn on a bank

Always payable on demand Either payable on demand, or at a fixed or determinable future time

Supposed to be drawn against previous deposits of funds Need not be drawn against a deposit

Need not be presented foe acceptance Required to be present for acceptance in certain cases

Ordinarily intended for immediate payment For circulation as an instrument of credit

The death of the drawer of a check with the knowledge of the bank revokes the authority of the bank to pay The death of the drawer of an ordinary bill does not revoke the authority of the drawee to pay

Must be presented for payment within a reasonable time after its issue Must be presented within a reasonable time after its last negotiation

The drawer of a check not presented within a reasonable time after its issue is discharged from liability to the extent of the loss caused by the delay The drawer of an ordinary bill is totally discharged

When accepted or certified, the drawer and indorsers are discharged form liability Remain liable in spite of acceptance

2. Give the effects of the certification of a check.

The effects of certification of a check are the following:

1. It is equivalent to acceptance

2. It discharges persons secondarily liable if procured by the holder

3. It operates as an assignment of the funds of the drawer in the hands of the drawee bank

4. The payee or holder, for all intents and purposes, becomes the depositor of the drawee bank, with rights and duties of one in such a situation

5. The drawer may not issue a stop payment order on the certified check.

3. Give the purpose of:

a. crossing a check

- The purpose of crossing a check is to ensure payment to the payee particularly when it is forwarded by mail or when it is entrusted to an agent. Crossing a check, either generally or specially, does not destroy its negotiability.

b. Certifying