CHAPTER ONE

INTRODUCTION TO NEGOTIABLE LAW

You should be familiar with the following areas

  • Meaning of Negotiable Law and Negotiable Instruments
  • Types of Negotiable instruments
  • Development of the law of Negotiable law

1.1  MEANING OF NETOTIABLE AND NETOGIABLE INTRUMENTS

Negotiable comes from the word negotiate, which means to get money for or give money for. The term to negotiate that “for “ is for the document. To negotiate means to transfer from one person to another so as the transferee constitute owner: from transferee to the transferor and transferee become the owner of the document, how is this transfer effects: may be by merely handing owner from one to another; when handing such money to another he/she become the legal owner of that money. That means if you give your bank for safe keeping that is not negotiation.

Negotiable Instruments is a document which is used in commercial, financial transaction to secure payment of money. Follows therefore that a negotiable instrument is a payment mechanism. Payment is effected by using a document (a piece of paper)

1.2  TYPES OF NEGOTIABLE INSTRUMENT

There are four types of negotiable instrument, these are

  • Bank notes

Is a piece of paper, money, constitutes a central bank’s promissory note to pay a stated sum to a bearer on demand.

  • Cheques

Is a printed form, used instead of money to make payments from your bank account. Section 73 of the Bill of Exchange Act (Cap 218 R.E 2002) define a chaque as a bill of exchange drawn on a banker payable delivered

  • Bill of exchange

Define a bill of echange 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 a demand or at a fixed or determinable future time a sum of certain of money to or to the order a specified person or bearer.

  • Promissory notes

Is a financial instrument that contains a written promise by one party (the note’s issuer or maker) to pay another party (the note’s payee) a definite sum of money, either on demand or at a specified future date.

1.3  THE DEVELOPMENT OF LAW OF NEGOTIABLE

1.3.1        COMMON LAW

Prior to the coming of William the Conqueror, a primitive type of law existed in Harold’s Britain based on the customs of the Ancient Britons, Romans and Saxons. The Normans brought with them new customs and legal usages of the Norman French which being amalgamated with the old customs of Harold’s Britain, became the Common Law of England. It concerned chiefly the rights of an individual and his duties towards his fellow citizens, It was, and still is, unwritten, though at times where some old custom has fallen out of use. Parliament has passed an Act re-stating the custom lest it should be forgotten and pass away from common law. Normally, however, Acts of Parliament or statutes are statute law as distinct from our ages-old common law.

In the early days of Norman and Plantagenet kings, common law was our only legal code. It was administered by the king’s Courts and in time these courts became known as the Courts of Common Law

1.3.2        COURTS OF COMMON LAW

These courts were well known for the jealous and rigid recognition of the ownership of property. If a man was recognized by common law as the legal owner of some property then the courts would afford him all the power of the law to enable him to obtain or retain that property. They would say that held the legal title to the property. It did not matter how many people had other kinds of interests in it; if one man had the legal title and there was no other legal interest in the property held by some other person, then the property was his absolutely as far as common law was concerned. Shakespeare leaves evidence of this in his ‘Merchant of Venice’. The bond that Antonio gave to shylock was a right to demand money from Antonio. Shylock was the legal owner of the property represented by the bond. It was a cruel bond but the property to Brown and the aunt jointly then the aunt would have received the help of common law because she would have been a joint legal owner and her interest in the property would have been a legal interest.

In the case of certain types of property, however the rigidity of common law expressed itself in another direction. Though it reserved its recognition only for the holder of the legal estate, it refused to recognize on the other hand the right of the legal owner to transfer such property to someone else. Example of such property was land chooses in action, etc. It should be noted however that transfers of such property by the legal owner were not necessarily illegal. The position was merely that common law refused to acknowledge that any change of ownership had in fact occurred though such a transfer, reserving its recognition to the original owner.

1.3.3        THE LAW OF EQUITY

It was not until the reign of Edward III that some serious attempt was made to ameliorate the rigidity and harshness of common law. Though it was never suggested that common law itself should be altered, it was felt that some remedy was required to prevent serious injustices arising from this rigidity. Take the case of the maiden aunt above-if the legal owner of the property (we would call him the trustee today) had refused to pay her the income, she would have had no redress at common law. But such injustices were said to offend the king conscience since he felt a responsibility for each subject in the kingdom. The Lord Chancellor was the Keeper of the King’s Conscience and he eventually acquired power to give judgment and decide cases where under common law there would have been no redress. The maiden aunt could have appealed to the Chancellor and he in his desire to rectify any situation that offended the King’s Conscience or as we would say today, that was not fair and equitable, would have given orders for the trustee to pay the maiden aunt her income. Since they were the King’s orders by virtue of the Chancellor’s office, they could not be disobeyed. The Chancellor, however, never overruled common law; he merely supplemented it with a view to ensuring fairness or equity. As his work in this sphere increased it had to be deputed in Edward III’s reign to other legal lords in proper courts and these courts came to be known as Courts of Equity. Interests in property such as that held by the maiden aunt were called equitable interests were known as equitable transfers ( or equitable assignments). If the new owner had difficulty in obtaining or retaining the property and common law refused to recognize him, the courts of Equity would probably compel the old owner to take legal action on behalf of the new owner to ensure his equitable rights. In other words, an equitable assignee has never had the right under common law to bring a legal action or, as we say, to sue in his own name.

Today, common law still exists separately from equity but the system of maintain separate courts was finally abolished in 1875. We now have their amalgamation into the High Court. Nevertheless, it is interesting to observe that there are departments known as Divisions of the High Court that still specialize to a great extent in one side or other. For example, our old Common Law the King’s (or Queen’s) Bench Division and our Court of Equity or the Chancellor’s Court continues in some distinct identity the chancery Division.