debentures, bonds and share warrants
CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS . simplicity of transfer . the possibility of transfer free from equities Simplicity of transfer ⁃ The instruments can be transferred from one person to another with out the need to comply with difﬁcult and cumbersome formalities ⁃ transferred either by delivering them to the recipient or by sighing them ﬁrst before delivering them to the recipient ⁃ This will depend on whether it is an order or a bearer instrument Transfer free from equities Basic principle One cannot transfer a better title to another person than the
title one has oneself Exception to the rule The reaon for the exception is based on commercial reality Negotiable instruments will only be used as a method of payment if the person who takes the instrument as payment for a debt obtains ownership and full tittle for the instrument in the same way he would have if payment was made with cash Commercial reality therefore dictates that under certain circumstances negotiable instruments should be treated in the similar manner to cash it means that the person who takes the negotiable instrument in good faith acquires ownership of the instrument, even though the person from whom he received the instrument has no title or a defective title to it. In other words, such a person derives his title from the instrument itself and is not subject to defences that could be raised against his predecessor's title. Unit 2
Basic concepts and deﬁnitions Bill of exchange In terms of s 2(!) of the BEA ⁃ It is an unconditional order in writing, addressed by one person to another, sighed by the person giving it, requiring the person to whom it is addressed, to pay on demand or at a ﬁxed or determinable future time, a sum certain in money to a speciﬁed person or his order or to bearer Cheque In terns of s 1 of the BEA ⁃ An unconditional order in writing addressed by one person to a bank, sighed by the person giving it, requiring the bank to whom it is addressed to pay on demand a sum certain in money to a speciﬁed person or his order, or to bearer. Promissory note In terms of s 87(1) of the BEA ⁃ An unconditional promise in writing made by one person to another, sighed by the marker, and engaging to pay on demand or at a ﬁxed or determinable future
time, a sum certain in money, to a speciﬁed person or his order or to bearer. PAYMENT TO ORDER OR BEARER Instrument payable to order An instrument is payable to order if it is payable to ⁃ ⁃ ⁃ a speciﬁed person or his order e.g. pay John Smith or order to the order of a specced person e.g. pay the order of John Smith to a particular person e.g. pay John Smith 5(1) the payee must either be named or otherwise indicated with reasonable certainty. Instrument payable to bearer An instrument is payable to beater in the following instances ⁃ If it is made payable to bearer. This will be the case when the instrument is originally made payable to bearer or to John Smith or bearer ⁃ If the instrument is payable to "cash or order" or the order of "cash"
If the only or the last endorsement appearing on it is an endorsement in black It the payee or endorsee is a ﬁctitious or non-existent person or someone who does not have the capacity to contract