Stuvia-2541-study-units-1-and-2--mrl4810-stuvia.pdf

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MRL4801 - SEM 1 2016 CLARISE OBERHOLZER / 082 665 1867 / [email protected] SECTION A NEGOTIABLE INTSTUMENTS UNIT 1 - INTRODUCTION TO THE LAW OF NEGOTIABLE INSTRUMENTS Historical Overview Bills of exchange probably originated in Italy during the 15th century. This era saw an amazing increase in commercial transactions and the giving of credit among the Lombards in the famous Italian commercial cities of Venice, Genoa and Florence. The merchants and moneychangers found it expedient not to transport the money itself and then to exchange it for foreign money, but to make use of an oral promise to pay. For instance, a moneychanger would make an oral promise to pay in a foreign country in that country's currency, by means of his representative. At that stage, this was still a contract of exchange. This also explains where the term bill of exchange comes from. Later on, the promise to pay was made in writing, and the moneychanger, for example, would undertake to pay a sum of money in a foreign country in the currency of that country. The merchant who received the promise in writing from the moneychanger would really be buying from the moneychanger the right to claim a particular sum of money in the foreign country. By virtue of this promise of payment, the merchant would obtain the right to claim payment of the amount mentioned in the document from the moneychanger's representative in the foreign country. Because the merchant had bought the promise of payment from the moneychanger with the money of his own country, it became customary to write the words ``for value received'' on the document. The custom of adding these words to bills and promissory notes has survived to this day. We find a further step in the development of bills of exchange in the so- called “order to pay'', which was later added to the promise to pay. Together with the written promise to pay, the moneychanger would also give his agent in the foreign country an order in writing to pay the merchant a certain sum of money in that country's currency. The promise to pay later disappeared, and the moneychanger gave only an order to pay. This order to pay was the predecessor of the modern bill of exchange. Suppose merchant C from France wished to have a sum of money available in Italy in order to buy certain merchandise at an annual market. C would then pay a sum of money in French currency to a moneychanger, A, in France. A would give B, his agent in Italy, a written order to pay a corresponding sum of money in Italian currency to D, C's trade associate in Italy, and A would hand the document over to C. C would send the document to his trade associate, D, in Italy, and D would
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  • Spring '08
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  • Law, person, Promissory note, Negotiable instrument, karentacadena | ktacadena

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