Negotiable instruments are documents that are mostly used in commerce, and in the banking field, they are also called titles or securities, credits, bills of exchange and commercial documents, and they have the legal peculiarity that they have the following characteristics:
- Autonomy: It consists of the principle that when your beneficiary is going to collect it, you cannot oppose the problems that may exist between the issuer and the one who is obliged to pay it. Literality: It means that your beneficiary should only demand the collection of the amount indicated in the document.Incorporation: It means that the document incorporates a right that the beneficiary must exercise, and consequently the document is worth by itself, as therefore in case of loss, your beneficiary does not have to collect the amount represented in the document.
The most widely used negotiable instruments in the banking field are checks, bills of exchange and promissory notes. Then we will delve into them.
Bank Negotiable Documents
Negotiable commercial documents replace cash; consequently they are negotiable.
These are: Bills of Exchange, Promissory Notes and Check.
Bill of exchange
It is a written order from one person (drawer) to another (drawer) to pay a certain amount of money at a future time (determined or determinable) to a third party (beneficiary). The people involved are:
The bill of exchange is a credit representative of money. It contains a certain or determinable amount of money that must be paid to its holder or beneficiary.
Consequently, the latter has a personal right or credit, which must be satisfied by the party or parties obliged to pay.
The letter has an abstract character. Therefore, it is independent of the business that gave rise to it.
This is the case when a letter is accepted in payment of the price of a sale. In this case, the buyer will have two obligations: one arising from the sale and the other, from the acceptance of the letter. To avoid this, it must be stated that the letter is accepted in payment of the price or to guarantee or facilitate the collection thereof.
The following persons intervene in the issuance and circulation of a bill of exchange:
- Drawer or drawer: He is the one who puts into circulation a bill of exchange, giving the order for payment to be made. Drawn: It is the one to whom the payment order is given, which may or may not be accepted. In the event that you accept, you will be obliged to do so, becoming a acceptor. Carrier or beneficiary: He is the holder of the credit represented by the letter, who must present it for acceptance and collection in the corresponding terms. You must also protest if it is not accepted or paid.
Eventually the following persons may also intervene in the circulation of the letter:
- Endorser: One who endorses a letter, with one of the purposes that will be indicated later. Endorser: The one in whose favor the letter is endorsed. The holder is considered a legitimate carrier if he justifies the right for an uninterrupted series of endorsements, even if the last one is blank. Guarantor: Person who guarantees the payment of the bill.
It is important to consider that the law provides that "all those who sign a bill of exchange, whether as draftsmen, acceptors or endorsers, are jointly and severally obliged to pay the bearer the value of the bill, plus any adjustments and interest, where appropriate." Consequently, the bearer can charge any of them, without being able to excuse himself alleging that another obligor is charged.
The bill of exchange must contain various mentions, some of which are supplied by law, so it is not essential to indicate them in the document. However, those that the law does not supply must be indicated, otherwise the document will not be valid as a bill of exchange. Notwithstanding this, it can be used as a simple private instrument.
The mentions that the bill of exchange must necessarily have to be valid as such are the following:
- Indication of being a bill of exchange: The same language used in the title must be used. The order, not subject to condition, to pay a certain or determinable amount of money. The sum may be determinable, therefore, the order may consist of paying an amount of national currency. or foreign currency, etc. Payment in kind does not apply. That the order is not subject to condition refers to the fact that the payment of the bill must not depend on a future and uncertain fact. The name and surname of the person to whom the payment must be made or to whose order it must be made. This is the carrier or beneficiary. In the case of legal persons, their corporate name must be indicated, the name, surname and address of the drawee, the signature of the drawer, the date of issue.
The document containing the above statements will be a bill of exchange.
Law No. 682 of the Commercial Code of the Dominican Republic states:
The bill of exchange is rotated from one place over another or over the same place.
It will have a date. It will state: the amount to be paid; the names of who should pay it; The time and place of payment; the value supplied in money, merchandise, account or in any other way.
It will be turned at the order of a third party or at the order of the same spinner.
It must express whether it is unique, first, second, third, fourth, etc.
- Art. 111. - A bill of exchange can be drawn against an individual, and it can be paid at the home of a third party. It can be released by order and account of a third party. 112. - Simple promises, all bills of exchange containing supposition, whether of name, of quality, either of domicile, or of the places from which they have been drawn up, or where they must be paid are considered. 113. - The signature of married and unmarried women who are not negotiating or who do not carry out trade publicly, in bills of exchange, have no value with respect to them, but simply as promises. Art. 114. - Bills of exchange signed by non-negotiating minors are null with respect to them, except for the respective rights of the parties, in accordance with article 1312 of the Civil Code.
The mentions that can be inserted at the time of the turn are the following:
a) Indication of the commune of the place of payment. This is important for purposes of verifying at the time of protesting the bill, if funds have been consigned in the Treasury for the payment of the bill.
b) Clause “returned without expenses” or “without obligation to protest”. Stamped by the drawer implies that the exchange actions against her, the endorsers or guarantors of both, will not expire, in case the letter is not protested in a timely manner. Included by an endorser, such actions will not expire, in the same case, with respect to him. This means that the "damage to the letter" does not occur, a matter that will be explained later.
c) “Non-endorsable” clause. If the drawer has inserted the words "not endorsable" or an equivalent expression, it may only be transferred or constituted as a pledge in accordance with the rules applicable to registered credits. That is, it cannot be endorsed for the indicated purposes, but it can be transferred or pledged according to other rules. However, it can be endorsed in collection commission.
d) Interest and readjustments of the bill. Interest runs from issue to payment, unless other dates are specified. A readjustment system allowed by law must be established.
The pay
The promissory note is a title of credit or security that contains the unconditional promise of a person who is called a subscriber, that he will pay a second person called beneficiary or holder, a certain amount of money in a certain period of time.
It must be indicated that the instrument is a "Promissory Note", being expressed in the language that the payment agreement is signed. When the document is printed, the promissory note title must be written entirely in the same language of the country where it is signed.
This requirement is due to the formality of the credits.
The promissory note, unlike the bill of exchange, has a promise to pay an unconditional sum in national currency or its international equivalent. The sum must be expressed in number (s) and in words, together with the currency in which the payment will be made. If paying in foreign currency, the equivalent of the currencies must be indicated on the day of payment. This requirement is what distinguishes it from other credits.
- Name of Beneficiary: The person to whom the promissory note must be paid must be identified. It may be in favor of a natural person or legal entity. Date and place of payment: The due date corresponds to the day the title will be paid. The expiration must be a date. The promissory note must indicate the place where it must be presented for payment.Date and place where it is subscribed: The date is used to indicate the exact day of payment and for accounting records to be purchased.Subscriber Signature: Name is not required of the subscriber, but only his signature, and does not admit another means to replace it, but the signature of another person, who signs at the request or on behalf of the drawer. The use of marks or fingerprints will not be accepted.
Law No. 682 of the Commercial Code of the Dominican Republic states that:
- Art. 187.- All provisions related to bills of exchange, and concerning: expiration, endorsement, solidarity, guarantee, payment, payment for intervention, protest, obligations and rights of the bearer, to the exchange or the interests, they are applicable to the promissory notes to the order; without prejudice to the provisions relating to the cases provided for in articles 636, 637 and 638. Art. 188.- The promissory note to the order must have a date. It will express: the amount to be paid, the name of the one to whose order it is subscribed, the time in which the payment is to be made; the value that has been given in cash, merchandise on account, or in any other way. 189.- All actions related to bills of exchange and promissory notes to order, subscribed by merchants, merchants or bankers, or by reason of commercial acts,they are prescribed for five years, accountants from the day of the protest, or from the last judicial proceeding, if there has been no conviction, or if the debt has not been recognized in a separate instrument.
However, the alleged debtors will be obliged, if required, to sign under oath, that they are no longer debtors, and their widows, heirs or representatives, who believe in good faith that they no longer owe anything.
The check
It is one of the instruments with which the greatest amount of money is mobilized in a country, by means of which a person (drawer or current account) has the right to dispose of the provision of funds that he has in a bank current account, either through favor of yourself or a third party.
Conditions for the payment of a Check.
- It must be well issued, that is, it must be dated by the filing date or earlier. The quantity in numbers must be equal to the quantity expressed in letters. It should not have amendments. The issuer's signature must be the same as the one registered by the Bank in its signature specimen. The issuer must have sufficient funds to make the payment.
Parties involved.
- Drawer or checking account. Drawn or Bank Drawn.
- Check to Order: The one drawn in the name of a natural or legal person, stating his name and surname, or the name of the entity, in the same check. The holder can freely endorse the document, with no other requirement than to sign on the back of the document.Check to the Bearer: For its ease of collection and transmission, it constitutes a kind of banknote issued by an individual, since, against the simple presentation by anyone, the bank pays or pays the amount indicated in the same document. By its nature, it does not require a written endorsement formula; it is transmitted with the simple material delivery. Non-Endorsable Check: It is one that can only be paid to its owner or original beneficiary, and that can only be transmitted in the form and with the effects of a transfer or ordinary sale.
- Management Check: It is the one issued by a Bank against itself, that is, the Bank is drawn and drawn at the same time. Own or Personalized Check: It is designed and printed by people or companies in charge and risk of themselves, being its special characteristics include the name of the interested party, the address, the share capital, the company logo, etc. These are under the custody and responsibility of the client. Traveler's Check: It is a means of payment used by those who make trips both nationally and internationally. The acquirer purchases traveler's checks at his usual bank and has them presented to his bank office that has a correspondent relationship with the selling bank.
He who issues the check without provision of funds and does not provide the drawee with sufficient funds before its presentation, shall be punished with imprisonment for 1 to 12 months, unless there is a fraud; in turn, whoever receives the check knowing that they do not have sufficient funds, will lose their criminal action against the drawer and will be fined up to a fifth of the value of the check.
The person who receives a check and when presented for collection is returned it for lack of funds, can protest it. That is, the certificate issued by a notary public, stating the cause for which it is not paid, and with this protest the beneficiary of the check can try the legal actions he deems appropriate, which are two. One is the civil action to collect the value of the check, being able to seize assets of the issuer of the check. And the other action is criminal, which consists of requesting the Court that the issuer of the check be punished with prison.
conclusion
Commercial Documents are very important credit documents to carry out legal transactions in any country. In the Dominican Republic, these transactions have their legal basis in the Current Commercial Code, where everything related to them is stipulated.
Both the Bill of Exchange, the Promissory Note and the Check are very important credit documents since they form a guarantee of recovery of the value of the provision of a service or the sale of some property, whether it be furniture or property; since through its issuance, the borrower can resort to established legal sources, as already stated in the Commercial Code, to make their payment effective.
