Essay On Negotiable Instruments Part II
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Ryan CapistranoEssay On Negotiable Instruments Part II
Uploaded by
Ryan CapistranoRyan Capistrano
AC181
Essay on Negotiable Instruments Part II
Negotiable instruments as discussed in the previous lesson is all about paper transactions making it easy
for the both parties to pay in such amount. As it consist of legal documents or papers that could be use
as an evidence to the court, there are some certain legalities that we should know in order for us to
defend and protect ourselves from those potential scammers. There are many scammers out there
trying to convince you to enter in a loan agreement by showing you documents and papers having
unbelievable amounts. The best example for this are those people who would borrow you a money then
they would signed a note saying that they would pay you back triple with that amount. Sometimes we
were convince by those exaggerating words but we should learn how to be more attentive on the
legalities of such transaction for us not to be deceive by those dirty scammers.
The signature attached on the negotiable instrument is very important as it binds the person who signed
it. But, a person can bind another person when he acts on behalf of that person. This is when an agency
were created when someone acts on behalf of a principal but in order for it to be legal, he must specify
in writings that he is acting only as an agent, he is duly authorized to do such transaction and he
disclosed the name of the principal. Signature on writing is only applicable if that in is accordance with
the agreement or the transaction enters in a statute of frauds. There are times that a signature might be
forged by someone as it can easily be copied by someone who are good in doing it. That's why there are
people who uses a customize stamp having it as their signature so that others would not have the
capacity to copy it. If there are cases that the court proved that the signature has been forged, all
persons prior to the signing of a forged documents are safe as a person who holds the document can not
enforce payment to them even to the person whose signature had been forged. But, he might enforced
payments to those people who genuinely signed the documents subsequently from the person who
forged it.
In entering in a contract, there are some instances when we need to ask for the age of the person to
whom we are transacting with because a minor can not enter in a contract without the supervision of
his guardian. The minority of a person can be set up in a court as he has limited capacity to enter in a
contract because of his age not knowing that he might enter in a fraudulent transaction. A corporation
might not also be bind by its officers or any of its agent without the prior authority. Additionally, an
incapacitated persons can also be use a defense in a legality of a contract as they might be deceive by
someone because of their lack of knowledge of capacity at that time.
There are instances when the real value of the negotiable instruments are not equal to the
consideration given by the person holding that NI. There might be some additional interest for every
person signing it or there might be a discount for it to be paid quickly. Consideration is the agreed
amount on the NI by the persons who are transacting the NI. When someone passes it to another
person, there might be changes to the value of the consideration as they might agreed on some
conditions. A person who gives valuable consideration the NI is called “Holder for Value”. The best
example for this are those who have lien or legal claims on the NI as they enter it by using as a collateral
for a loan. They have rights to give value to the NI. There might be instances when the holder does not
give a consideration to the NI. If that happens personal defense is the reasonable decision to make.
It is important on how the negotiation has been agreed upon signing the NI. It could a person payable to
the bearer of the order. If it is states that it is only payable to the bearer, it only pays the NI to the one
who holds it. If it specifies that it is payable to order, the one who originally the payee is the one who
will receive the payment.
Indorsement is very essential in a negotiable instrument. It helps the NI to be paid quickly by indorsing it
the other person. It is about writing the name of the endorser to transfer the liability. It contains the
note that the NI will be paid by the maker itself and if the maker failed to pay it, he guarantee the NI and
will be liable to pay the amount agreed upon the note. Special indorsement would specify the name of a
person to whom the payment would be received while a blank indorsement would not specify to whom
it should be paid but rather the payment would be received by someone who holds the NI.
