Professional Documents
Culture Documents
Contents
Questions:.......................................................................................................................................................................2
A. Course text Book:....................................................................................................................................................3
B. ACTS in course........................................................................................................................................................3
C. CASE LAW................................................................................................................................................................3
D. Negotiable Instruments, Negotiability Concept and Definitions: Part 1 Chapter 1&2, Definitions Part2 sect 1........3
A. Definitions: from Part 2 ch1..................................................................................................................................3
B. Negotiable Instruments: part 1 ch 1.....................................................................................................................5
a) INTRODUCTION: Bills of Exchange Act 34 of 1964............................................................................................5
b) SPECIAL (ILLOGICAL) IMPLICATIONS AND CIRCUMSTANCES OF CHEQUES/BILLS to take note of:......................5
c) INDICATE WHEN A DOCUMENT WILL BE REGARDED AS A LIQUID DOCUMENT FOR PURPOSES OF
PROVISIONAL SENTENCE :.......................................................................................................................................5
d) EXPLAIN THE ESSENTIAL CHARACTERISTICS OF NEGOTIABILITY.......................................................................5
e) DISTINGUISH IN DETAIL BETWEEN THE FOLLOWING TYPES OF DOCUMENTS....................................................6
D. CHAPTER 2/WEEK2 :FORMS AND INTERPRETATIONS OF BILLS OF EXCHANGE. Sec 2-19 of act.............................6
a) DISTINGUISH IN DETAIL BETWEEN CONCEPTS LIABILITY AND VALIDITY............................................................6
b) Mention the requirements for cheque (2 differences to bills)............................................................................6
c) Mention requirements for promissory note (3 differences to bills)....................................................................7
d) Mention requirements for bill of exchange........................................................................................................7
e) Differentiate between cheque, promissory note and bill of exchange...............................................................7
f) Explain the effect if different parties to a bill are the same person, or drawee a fictitious person or not having
capacity to contract.................................................................................................................................................7
g) Discuss the requirements as to drawee............................................................................................................7
h) Discuss requirements as to payee....................................................................................................................7
i) Explain the effect of omission of date in a bill...................................................................................................8
j) Define an inchoate document...........................................................................................................................8
E. CHAPTER 3 /WEEK3 CAPACITY AND AUTHORITY OF PARTIES.................................................................................8
a) Explain the effect of a forged and unauthorized signature................................................................................8
b) Explain the effect of principles governing payment of uncrossed cheques, with regard to the case of a forged
drawers signature...................................................................................................................................................9
c) Explain the principles governing payment of uncrossed cheques , with regard to the case of a forged
endorsement...........................................................................................................................................................9
E. Consideration for a Bill:...........................................................................................................................................9
a) DEFINE THE WORD VALUE....................................................................................................................................9
b) DEFINE THE HOLDER IN DUE COURSE..................................................................................................................9
c) DEFINE AN ACCOMMODATION PARTY TO A BILL...................................................................................................9
d) DISCUSS THE REQUIREMENTS FOR A HOLDER IN DUE COURSE............................................................................9
e) DISCUSS THE PRESUMPTION AS TO VALUE AND GOOD FAITH............................................................................10
F. Chapter 5 Week 5 Negotiation of a Bill. Sec 29-36................................................................................................10
a) Explain How a bill is Negotiated..........................................................................................................................10
b) Explain the requirements of a valid indorsement...............................................................................................10
c) distinguish between the different kinds of indorsements...................................................................................11
d) Discuss the regularity of indorsements with referral to case law........................................................................11
e) shortly discuss the rights and powers of the holder............................................................................................11
Week 6 GENERAL DUTIES OF THE HOLDER 37-50.........................................................................................................12
MENTION INSTANCES IN WHICH PRESENTMENT FOR ACCEPTANCE IS necessary IN ORDER TO RENDER A PARTY
LIABLE ON THE INSTRUMENT sect 37 (only for bills, not cheques or notes)..............................................................12
TIME sect 37 for 1 and sect 38 for 2(only for bills, not cheques or notes).................................................................12
shortly discuss rules as to presentment for acceptance and excuses for non-presentment. sect 39(only for bills, not
cheques or notes).....................................................................................................................................................12
Questions:
1) For notice of dishonor- with a cheque, how does it work? Must it be like said pg 291 , or in own notes “ sect 47-
rules as to notice of dishonor
a) On next business day ; so NOT on same business day or how?if bank forgets to post on next business day, so 2
days late, or addresses it wrong? Then you loose out or what if youy got the cheque?
b) Pg 295 (d) what means “???where the bill was accepted or made for the accomodation of such indorser???”.
B.ACTS in course
A. Bills of Exchange Act 34 of 1964
A.CASE LAW
1) Week 5- CASE LAW : Silcan Estate & Finance co. vs Astra Café
a) The court referred to the following authorities in answer to the question : when is an indorsement irregular:
i) caveat emptor : Arab bank vs Ross : If the bill itself conveys a warning : caveat emptor (beware the
buyer) from Arab bank vs Ross
ii) on the instrument OR any omission /suspicious/irregularities: Another court said; if there is
anything on the instrument OR any omission , which would make the person receiving the bill
suspicious, then one must say he did think that it might have irregularities, it is not as if he did not think
there could be irregularities.
iii) not the actual indorsement / is irregular :Another court said : if it seems that any indorsement on the
bill is not the actual indorsement of that specific payee then it IS IRREGULAR
3) ‘AT SIGHT’ , :means when the drawee who might be the acceptor , ie the bank etc, actually “sees it”/ ie: gets it
presented to them.
4) PAYABLE ‘ON PRESENTATION’ or ‘ON DEMAND’ : all means on demand actually.
5) DRAWEE BANK: the bank which is unconditionally instructed by one person to pay a specified person or his
order or bearer , a certain sum of money, on demand, in a written order signed by the person drawing the cheque
up(the drawer).
6) DRAWER: THE person who is originally giving and issuing the bill or cheque, who gives instruction to a bank or
another person to pay a specified person a sum certain in money , and who must signs the cheque, or on whos
behalf the cheque is signed.
7) PAYEE: The person who is to be paid when presenting a negotiable instrument for payment.When a person gives
instruction to pay a specific person or promises to pay specific person a sum certain in money, it is the person
who must receive the payment eventually.
8) HOLDER: means the payee or indorsee of a bill who is in possession of it, or the bearer thereof-
a) Some facts: so EVERY HOLDER IS A POSSESOR. But if a holder , who is the true owner, pledges it to another
as security: the pledgee becomes the new holder, but the pledgor remains the only OWNER.BUT if indorsed
then the indorser is not the Owner or Holder anymore, the indorsee is now both.
b) Some facts: a holder can be a thief who stole it , in the case of an instrument which is payable to bearer.
c) Some facts: if made out payable to order, only the holder can negotiate the instrument.
d) Some facts: date of issue is missing – any holder can insert it for: if payable after a certain period after date
of issue.
e) Some facts: YOU CANNOT BE A HOLDER WITHOUT FIRST HAVING POSSESSION-YOU MUST HAVE POSSESSION.
f) Rights: 1-to sue on the instrument in his own name
g) Rights: 2-give a valid discharge to a person who makes a payment in due course.
h) Rights: 3-present cheque for payment
i) Rights: 4- to negotiate it if uncrossed
9) POSSESSOR: person who has the bill/cheque /instrument in his hands, who actually has it.(he could be the legal
owner or even a thief, he must just have it)
10) HOLDER FOR VALUE: A holder takes a bill for value if he takes it under onerous title.: this means if he gives a
benefit in return for receiving the bill, as a quid pro quo.
11)HOLDER IN DUE COURSE.:
a) A holder in due course is a holder who has taken a bill, under the following circumstances:also a holder in due
course receives the bill free of equities.
i) Complete and regular on the face of it
ii) Overdue :Must become the holder before it was overdue
iii) Dishonoured: If previously dishonoured he must not have notice thereof (must not know this)
iv) Good Faith :Must have taken the bill in good faith
v) ‘and for Value’ :Must have taken the bill in return for value, or for quid pro quo
vi) Defect Title :Must have had no notice of any defect in title of person who negotiated the bill to him. AT
THE TIME WHEN IT WAS NEGOTIATED TO HIM
vii) Negotiated: it must be negotiated to the new holder by the indorsement or by mere delivery for a bearer
cheque.
viii)In particular: his title is defective if (he is not a holder) if he obtained the bill or acceptance thereof by
fraud or other unlawful means, or for an illegal consideration, or in breach of faith.
ix) If value was not given – new holder only gets the Rights: of last holder in due course
12) LIQUID DOCUMENT: definition: doc in which the person (1) unconditionally acknowledges , (2)over his
signature,or that of his agent,(3)his indebtedness to the creditor in an (4)ascertained amount of money, the
payment of which is (5)due to the creditor.
13) BEARER: person in possession of a bill which is payable to bearer.
a) A bearer cheque : it says on the face either or similar to: Pay Bearer | Pay.A.Brown or bearer. | Pay cash or
Bearer | Pay Wages or Bearer.
14) NOTE: promissory note
15) INDORSEMENT: means an indorsement completed by delivery( signed on the face of it in orderto…)
a) In Blank:
b) Special Indorsement
c) Restrictive indorsement
d) Conditional Indorsement.
16) ORDER INSTRUMENT : substitute for words: payable to a specific person or his order.(see definition below)
1) VALIDITY: validity refers to: A cheque, Bill of exchange and a promissory note are each defined in a particular
way in the Bills of Exchange Act. In order for the instrument to be Valid it must comply with the relevant statutory
definition definition.It will then be VALID, even if no person is actually liable (thereon.)to pay it & OTHER relevant
parts of the act.
2) LIABILITY: (3 examples of liable parties here!) liability refers to whether anybody is liable to pay a cheque or
other negotiable instrument. It could happened that a Cheque is Valid , but nobody is liable to pay it yet because
the maker has not issued it yet.So if it has not been delivered yet , neither the drawee bank nor the drawer is
yet liable thereon.a drawee may also become liable by accepting a bill in which case he is the ‘Acceptor’.A
payee may become liable by indorsing the cheque in which case he is the ‘Indorser’. The requirements for
liability are:
a) Signature
b) Authority to sign the cheque(eg on behalf of a company)
c) Delivery
d) Capacity to Contract.
a) Explain the effect if different parties to a bill are the same person, or drawee a
fictitious person or not having capacity to contract.
1) The HOLDER may at his option, treat it as a Bill of exchange, or as a PROMISSORY NOTE,
a) If treated as a promissory note it means he may treat it as a unconditional promise to pay by the drawer.
b) The law says a bill may be made payable to the drawer or to the drawee, that is allowed, but the rule above
will apply.
a) Explain the effect of principles governing payment of uncrossed cheques, with regard
to the case of a forged drawers signature
If a cheque is uncrossed , it means it could be indorsed and transferred, but no person to whom it is transferred , nor
the original holder, will get any right to 1-RETAIN BILL, 2-GIVE DISCHARGE THEREFOR,3-ENFORCE PAYMENT
thereof against ANY PARTY THERETO THROUGH OR UNDER a forged SIGNATURE, exept AGAINST the person
who forged it IF IT WAS A FORGED DRAWERS SIGNATURE, because any further indorsement would be useless
because the original holder to whom it was issued cannot pass on any rights to you,EXCEPT any holder in due course
will be able to claim against the indorser personally , but not against the person whose name was forged.
b) Explain the principles governing payment of uncrossed cheques , with regard to the
case of a forged endorsement.
If a cheque is uncrossed , it means it could be indorsed and transferred, but no person to whom it is transferred , by
means of a forged indorsement gets any rights to 1-RETAIN BILL, 2-GIVE DISCHARGE THEREFOR,3-ENFORCE
PAYMENT thereof against ANY PARTY THERETO THROUGH OR UNDER a forged SIGNATURE, exept AGAINST
the person who forged it personally, and this includes any persons to whom the cheque was indorsed after the forged
indorsement.they only have rights against the person that actually indorsed and negotiated it to them, not against
any other parties to the cheque. BUT all holders and holders in due course from before the forged signature do still
have all the normal rights and don’t loose any of their rights, like those after the forged signature.
TIME SECT 37 FOR 1 AND SECT 38 FOR 2(ONLY FOR BILLS, NOT CHEQUES OR NOTES)
1-IF HOLDER OF BILL DRAWN PAYABLE ONLY FOR :ELSEWHERE place busin/residence of drawee- if holder has no
time, with reasonable diligence, to present for acceptance before present for payment, delay caused by presenting
for acceptance will be excused when he gets there to present for payment.(only for this specific case type-
residence/business , and this 1 number actually forms part of sect 37 before this, but not fit in question for syllabus
in paragraph before)
2-a bill payable after sight that was negotiated must be presented or re-negotiated in a reasonable time or all
drawers and indorsers prior to that holder are discharged–(“time” means with regard to facts of case,trade usage
similar bills,nature of bill.)
SHORTLY DISCUSS RULES AS TO PRESENTMENT FOR ACCEPTANCE AND EXCUSES FOR NON-
PRESENTMENT. SECT 39(ONLY FOR BILLS, NOT CHEQUES OR NOTES)
1) A bill is seen as having been PROPERLY PRESENTED FOR ACCEPTANCE if the following rules are obeyed:
a) 1-By or on 2-behalf of holder, at a 3-reasonable hour on a 4-business day, and before the bill is 5-overdue,
to the 6-drawee or a person 7-authorized to accept/refuse on his behalf.
b) If bill is addressed to 2 or more drawees, who are 1-not partners, presentment must be made to 2-them
all,unless one has 3- authority to accept for all, (in which case presentment may be made to him
only).
c) Drawee dead , presentment may be made to executor
d) Drawee insolvent, presentment to him or his trustee.
e) Presentment by post, if in due course, is sufficient.
2) Presentment in accordance with sub-section 1 is excused, and a bill may be treated as DISHONOURED BY
“NON-ACCEPTANCE”, ( this means if the holder does not present for acceptance in time or at all as per above 5
rules , he could be excused any way and the bill actually seen in his favour as ‘dishonoured by non-acceptance’…
if perhaps any of the following reasons) if the:
a) Drawee is 1-dead or 2-insolvent 3-fictitious or non-existing person 4-person not having capacity to
contract.
b) If after ‘EXERCISE OF REASONABLE DILIGENCE”, such presentment “CANNOT BE EFFECTED.”
c) If when irregular presentment is made, acceptance IS REFUSED ON SOME OTHER GROUND.
3) The fact that the holder of the bill has reason to believe that the bill, on presentment, will be dishonoured,
does NOT excuse presentment.
-OWN NOTES-IF A BILL IS NOT ACCEPTED IN CUSTOMARY TIME AFTER IT HAS BEEN
PRESENTED FOR ACCEPTANCE BY THE HOLDER, THEN IT MUST BE TREATED AS
‘DISHONOURED BY NON-ACCEPTANCE’ OR ELSE HOLDER LOOSES HIS RIGHT OF RECOURSE
AGAINST DRAWER AND INDORSERS SECT 40 ( ONLY FOR BILLS, NOT CHEQUES OR NOTES)
SECT 43 RULES AS TO PRESENTMENT FOR PAYMENT SECT 43 (FOR CHEQUES AND BILLS AND
PROMISSORY NOTES)
1) –subject to the provisions of this act- A bill must be duly presented for payment or ELSE the drawer & indorsers
are discharged.
2) A bill is duly presented for payment as per following rules: AND IF IT IS NOT PRESENTED exactly like LIKE
THIS THEN THE DRAWER & INDORSERS WILL BE DISCHARGED
(1) If it is not payable on demand, presntment must be made on the day it falls due.
(2) If it is payable on demand , presentment must be made within a REASONABLE TIME as defined below,
after issue of indorsement.
(3) Made by the holder or person authorized to receive payment on his behalf,at a reasonable hour on a
business day,at the PROPER PLACE as defined below,either to the payer as designatdby the bill or
person authorized to pay/refuse on his behalf, if with the exercise of reasonable diligence such person
can be found there.
(4) If bill is drawn upon and or accepted by 2 or more persons who are not partners, and no place of
payment in specified, presentment must be made to them all.
(5) If drawee or acceptor of the bill is dead, and no place of payment is specified, presentment must be
made to his executor, if there is one, and with the exercise of reasonable diligence, he can be found.
b) TIME: 1-nature of bill 2-usage of trade for similar bills 3-facts of that case
c) PROPER PLACE:
i) When a place of payment is specified in the bill the bill is presented there
ii) When no place of payment is specified , but the address OF THE DRAWEE OR ACCEPTOR is given, and
the bill is presented there
iii) When no place of payment, AND no address of drawee or Acceptor is given, and the bill is
presented at the drawee or acceptor’s place of business if known , and if not, at ordinary place of
residence
iv) In any other case, if the bill is presented wherever the drawee or acceptor can be found, OR at his last
known place of business or residence
d) A presentment by post, IF IN DUE COURSE, is sufficient.
-ONE NOTES-PRESENTMENT FOR PAYMENT BY BANK OF A CHEQUE–
basicly by a
1-collecting bank on behalf of holder: per rules/place of bank clearing house of which both drawee bank and
collecting bank are members, or at a place of payment designated by drawee bank, or by data transmitted between
them if the data shows sum,cheque no. if any,account holders drawee bank. ….+ if presented as any above drawee
bank is not relieved of any liabilities it would have been subject to if the cheque was presented direcly to that bank
itself by holder.
SECT 46 EXPLAIN NOTICE OF DISHONOUR AND THE EFFECT OF FAILURE TO GIVE SUCH
NOTICE (FOR CHEQUES AND BILLS AND PROMISSORY NOTES)
1) If by non acceptance or non-payment, notice must be given to drawer AND each indorser provided:
a) For non-acceptance: if notice not given : rights of next holder in due course not affected.
b) For non-acceptance : if notice was given :not need give notice of non-payment unless it WAS accepted in the
meantime.
2) Any indorser or drawer to whom notice has NOT been given is discharged.
3) Notice does NOT have to be given to acceptors of a bill OR makers of promissory notes OR signers of aval
SECT 47 EXPLAIN RULES OF NOTICE OF DISHONOUR SECT 47 (FOR CHEQUES AND BILLS AND
PROMISSORY NOTES)
1) Must be given in accordance with following rules-for cheques bills notes
(1) By or on behalf of 1-holder OR by or on behalf of 2-INDORSER who at time of giving it IS LIABLE
HIMSELF
(2) May be given by an agent , either in his own name or in name of any party entitled to give notice,
whether that party is his principle or NOT
(3) In writing OR personal communication , 2-must sufficiently identify the bill 3-and say it has
been dishonoured by non-acceptance or non-payment
(4) Written need NOT be signed 2- insufficient written may be supplemented by verbal.
(5) Return to DRAWER OR INDORSER ,of dishonoured bill is sufficient notice
(6) To person or authorized person to receive on his behalf
(7) If drawer or an indorser is1- dead, must give notice to 2-executor if there 3-is one and if with
exercise of 4-due diligence he can be found.
(8) Drawer/indorser insolvent – then to EITHER him or his trustee.
(9) If 2 or more drawers or indorsers who are 1-not partners :notice must go to each of them UNLESS one
has 2-authority to take it for any of the others, then they all got notice , exept those who did not give
such authority.
(10)ONLY From actual time(not before) of dishonoured till ‘reasonable time’ over.
(11)If in hands of an agent at time of dishonor- he must give notice to parties liable OR to his principle
in the same ‘reasonable’ time allowed as for giving notice to the liable parties, .(to principle) pg 292
(12)Principle then has same time from when he hears to give his notice, as if agent were a
normal holder .(see 5)
2) If given by or on behalf of holder : it keeps for all following holders & all prior indorsers –WHO DO HAVE
ARIGHT OF RECOURSE AGAIST PARTY TO WHOM GIVEN.(so probably not for cheques where next due course knew
of dishonor)
3) If NOTICE given by or on behalf of any indorser who may give NOTICE : it keeps for holder & all indorsers
after party to whom it was given
4) Unless receiver WAS mislead by it, a misdescription of bill in notice does not make the notice invalid.
5) TIME: UNLESS THERE ARE SPECIAL CIRCUMSTANCES , it must either be POSTED or GIVEN on the NEXT
business day after dishonor /exept if next bus.day. is Saturday, then Monday not sat. If not then it is seen as not
SHORTLY DISCUSS THE RULES AS TO A BILL IN A SET WITH REFERENCE TO SECT 69.
1) Rules:
THE DUTY TO RECONCILE BANK STATEMENT AND TAKE REASONABLE CARE WITH BLANK
CHEQUE FORMS.
Any person or firm who is required by law to have an auditor or have an accounting officer, shall exercise reasonable
care in the custody of blank cheque forms and in reconciliation of bank statements.
IF A CROSSED CHEQUE MARKED NOT NEGOTIABLE CHEQUE IS LOST OR STOLEN THE TRUE
OWNER CAN CLAIM FROM ANY SUBSEQENT POSSESSORS.
1) The true owner gets 2 important rights:
a) He may claim from any subsequent possessor who DID got it as a donation or in return for consideration, the
lesser of his money back or his loss-
b) He may demand information as to the stolen cheque from possessors, if the don’t say then they are deemed
as being liable as if they received consideration for the cheques or got it donated to them