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46-655: An accepting house was a primarily British institution which specialised in the acceptance and guarantee of bills of exchange thereby facilitating the lending of money. They took on other functions as the use of bills declined, returning to their original wider function of merchant banking . The 'Accepting Houses' in the City of London had representation in Westminster by the Accepting Houses Committee which ensured policy coordination between them,

92-556: A certain sum of money only to or to the order of a certain person or the bearer of the instrument". A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee . A common type of bill of exchange is the cheque ( check in American English ), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay

138-445: A check. (d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Article. Thus, for a writing to be a negotiable instrument under Article 3, the following requirements must be met: The latter requirement

184-454: A holder in due course being the touchstone for the right to, and power to demand, payment. In some instances, the negotiable instrument can serve as the writing memorializing a contract, thus satisfying any applicable statute of frauds as to that contract. The rights of a holder in due course of a negotiable instrument are qualitatively, as matters of law, superior to those provided by ordinary species of contracts: Negotiation often enables

230-423: A negotiable instrument is cognizable as the value given up to acquire it (benefit) and the consequent loss of value (detriment) to the prior holder; thus, no separate consideration is required to support an accompanying contract assignment. The instrument itself is understood as memorializing the right for, and power to demand, payment, and an obligation for payment evidenced by the instrument itself with possession as

276-570: A qualified group of individuals that would constitute a strong bureaucracy and fill administrative roles. The cities became intellectual centers of modernization. Through their studies in the madrasa system, softas aimed to become part of the ulama , the class of Muslim religious elites within the Ottoman Empire. The ulama class, especially during the classical period, had significant political and social power and functioned as an avenue of economic advancement. Though they lacked military power,

322-399: Is a negotiable instrument or a non-negotiable instrument. Bank notes are frequently referred to as promissory notes, a promissory note made by a bank and payable to bearer on demand. According to section 4 of India's Negotiable Instruments Act, 1881 , "a Promissory Note is a writing (not being a bank note or currency note), containing an unconditional undertaking, signed by the maker to pay

368-601: Is called an endorsement . There are five types of endorsements contemplated by the Code, covered in UCC Article 3, Sections 204–206 : If a note or draft is negotiated to a person who acquires the instrument the transferee is a holder in due course and can enforce the instrument without being subject to defenses which the maker of the instrument would be able to assert against the original payee, except for certain real defenses . These real defenses include (1) forgery of

414-411: Is called the drawer. He gives the order to pay money to the third party. The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay the bill. The party in whose favor the bill is drawn or is payable is called the payee. The parties need not all be distinct persons. Thus,

460-416: Is referred to as the "words of negotiability": a writing which does not contain the words "to the order of" (within the four corners of the instrument or in endorsement on the note or in allonge ) or indicate that it is payable to the individual holding the contract document (analogous to the holder in due course) is not a negotiable instrument and is not governed by Article 3, even if it appears to have all of

506-539: Is what is meant by saying that a bill is negotiable. In some cases a bill is marked "not negotiable"—see crossing of cheques . In that case it can still be transferred to a third party, but the third party can have no better right than the transferor. In the United States , Articles 3 and 4 of the Uniform Commercial Code (UCC) govern the issuance and transfer of negotiable instruments, unless

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552-509: The Ilkhanid rulers of Persia printed the "cha" or "chap" which was used as paper money for limited use for transactions between the court and the merchants for about three years before it collapsed. The collapse was caused by the court accepting the "cha" only at progressive discount. Later, such documents were used for money transfer by Middle Eastern merchants, who had used the prototypes of bills of exchange (" suftadja " or " softa ") from

598-477: The 1980s and 1990s. This bank and insurance -related article is a stub . You can help Misplaced Pages by expanding it . Bills of exchange William Searle Holdsworth defines the concept of negotiability as follows: In the Commonwealth of Nations almost all jurisdictions have codified the law relating to negotiable instruments in a Bills of Exchange Act, e.g. Bills of Exchange Act 1882 in

644-493: The 8th century to present. Such prototypes came to be used later by the Iberian and Italian merchants in the 12th century. In Italy in the 13–15th centuries, bills of exchange and promissory notes obtained their main features, while further phases of their development have been associated with France (16–18th centuries, where the endorsement had appeared) and Germany (19th century, formalization of Exchange Law). The first mention of

690-748: The Mauryan period in the 3rd century BC, an instrument called adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person, which corresponds to the definition of a bill of exchange as we understand it today. The ancient Romans are believed to have used an early form of cheque known as praescriptiones in the 1st century BC and 2,000-year-old Roman promissory notes have been found. Common prototypes of bills of exchanges and promissory notes originated in China , where special instruments called fey tsien which were used to safely transfer money over long distances during

736-858: The UK Treasury and the Bank of England . Bills endorsed by members of the Committee were originally eligible for rediscount at the Bank of England, although this right was eventually extended to other banks in the UK and abroad. The term accepting house was more of an indication of status rather than function. Examples of UK accepting houses were Hambros Bank , Hill Samuel , Morgan Grenfell , Rothschild , J. Henry Schroder Wagg , Arbuthnot Latham , Seligman Brothers, William Brandts and S.G. Warburg . Most accepting houses were absorbed into larger banking entities during

782-1031: The UK, Bills of Exchange Act 1890 in Canada, Bills of Exchange Act 1908 in New Zealand, Bills of Exchange Act 1909 in Australia, the Negotiable Instruments Act, 1881 in India and the Bills of Exchange Act 1914 in Mauritius. Additionally most Commonwealth jurisdictions have separate Cheques Acts providing for additional protections for bankers collecting unendorsed or irregularly endorsed cheques , providing that cheques that are crossed and marked 'not negotiable' or similar are not transferable, and providing for electronic presentation of cheques in inter-bank cheque clearing systems. In India, during

828-499: The Uniform Commercial Code as enacted in a particular State's law contemplate real defenses available to purported holders in due course. The foregoing is the theory and application presuming compliance with the relevant law. Practically, the obligor-payor on an instrument who feels he has been defrauded or otherwise unfairly dealt with by the payee may nonetheless refuse to pay even a holder in due course, requiring

874-540: The United States. In England, two of the main reasons why the use of negotiable instruments became so popular was: The modern emphasis on negotiability may also be traced to Lord Mansfield . Germanic Lombard documents may also have some elements of negotiability. A negotiable instrument can serve to convey value constituting at least part of the performance of a contract , albeit perhaps not obvious in contract formation, in terms inherent in and arising from

920-404: The bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today. A bill of exchange is essentially an order made by one person to another to pay money to a third person. A bill of exchange requires in its inception three parties—the drawer, the drawee, and the payee. The person who draws the bill

966-407: The city, and a general conception of the softas as ignorant. Ultimately, an elite class favored by the sultan and largely inaccessible to the softas formed by the 18th century. In order to compete, it was necessary for softas in the madrasas to attach themselves to high bureaucratic officials or esteemed religious figures who could function as their patrons and recommend them for high posts. Yet, even

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1012-409: The drawer may draw on himself payable to his own order. A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn endorse it to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the previous payee or endorser from doing so. This

1058-481: The empire's handling of religious affairs and held to early religious traditions. Starting during the 17th century, they strongly opposed Ottoman attempts for religious reform and modernization. Yet, the religious elites condemned the softas, deeming them ignorant and guilty of misrepresenting the Muslim religion. Specifically, they faulted them with overemphasizing the importance of the afterlife and failing to recognize

1104-413: The equal importance of life on earth, rather than considering it transitory. They said this interpretation simplified the human experience and discouraged hard work. Due to the softas’ frustration with the hierarchical structure of the ulama class as well as their disapproval of the religious operations of the empire, many joined to form an unruly mob that roamed the capital. Starting in the 16th century,

1150-427: The few softas who managed to enter the ulama after graduating from the madrasa system ultimately constituted the lowest strata within the class, the beldīs. Those who failed to find positions moved back to the countryside to work in lower posts. As the Ottoman Empire expanded and Istanbul attracted more people, posts within the ulama became more competitive and difficult for softas to secure. The softas also criticized

1196-409: The holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor. (b) "Instrument" means a negotiable instrument. (c) An order that meets all of the requirements of subsection (a), except paragraph (1), and otherwise falls within the definition of "check" in subsection (f) is a negotiable instrument and

1242-693: The incentives of the mortgage originators and the assignees efficiently. Softa According to the Encyclopaedia of Islam, Second Edition written by English historian and Orientalist C.E. Bosworth , the term "softa" (ṣofta) was a name given to students in the fields of theology, law and other sciences within the madrasa educational system of the Ottoman Empire . A parallel form can be found in Persian , pronounced as sūkhte , meaning "in flames" or "to set on fire" , i.e. consumed by

1288-415: The instance of a " bearer instrument ", wherein the possession of the document itself attributes and ascribes the right to payment. Certain exceptions exist, such as instances of loss or theft of the instrument, wherein the possessor of the note may be a holder, but not necessarily a holder in due course. Negotiation requires a valid endorsement of the negotiable instrument. The consideration constituted by

1334-434: The instrument; (2) fraud as to the nature of the instrument being signed; (3) alteration of the instrument; (4) incapacity of the signer to contract; (5) infancy of the signer; (6) duress; (7) discharge in bankruptcy; and, (8) the running of a statute of limitations as to the validity of the instrument. The holder-in-due-course rule is a rebuttable presumption that makes the free transfer of negotiable instruments feasible in

1380-493: The instruments are governed by Article 8 of the UCC. The various state law enactments of UCC §§ 3–104(a) through (d) set forth the legal definition of what is and what is not a negotiable instrument : § 3–104. NEGOTIABLE INSTRUMENT. (a) Except as provided in subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in

1426-443: The latter to resort to litigation to recover on the instrument. While bearer instruments are rarely created as such, a holder of commercial paper with the holder designated as payee can change the instrument to a bearer instrument by an endorsement. The proper holder simply signs the back of the instrument and the instrument becomes bearer paper, although in recent years, third party checks are not being honored by most banks unless

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1472-434: The law applicable to negotiable instruments: Although often considered foundational in business law, the modern relevance of negotiability has been questioned. Negotiability can be traced back to the 1700s and Lord Mansfield , when money and liquidity was relatively scarce. The holder in due course rule has been limited by various statutes. Concerns have also been raised that the holder in due course rule does not align

1518-407: The love of God or learning. However, the relationship between the two words is unclear. More specifically, "softa" seems to have been used to refer to beginners within their fields of science or theology, where as after they've completed their first courses they're instead referred to as "dānishmend" . Starting with Mehmed II , Ottoman sultans established these centers of education to develop

1564-409: The main differences: Although possibly non-negotiable, a promissory note may be a negotiable instrument if it is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the payee , or at fixed or determinable future time, a sum certain in money, to order or to bearer. The law applicable to the specific instrument will determine whether it

1610-415: The modern economy. A person or entity purchasing an instrument in the ordinary course of business can reasonably expect that it will be paid when presented to, and not subject to dishonor by, the maker, without involving itself in a dispute between the maker and the person to whom the instrument was first issued (this can be contrasted to the lesser rights and obligations accruing to mere holders). Article 3 of

1656-406: The original obligor and obligee can become parties to a negotiable instrument. The most common manner in which this is done is by "endorsing" (from Latin dorsum , the back + in ), that is placing one's signature on the back of the instrument—if the person who signs does so with the intention of obtaining payment of the instrument or acquiring or transferring rights to the instrument, the signature

1702-457: The original payee has signed a notarized document stating such. Alternatively, an individual or company may write a check payable to "cash" or "bearer" and create a bearer instrument. Great care should be taken with the security of the instrument, as it is legally almost as good as cash. Under the Code, the following are not negotiable instruments, although the law governing obligations with respect to such items may be similar to or derived from

1748-433: The other features of negotiability. The only exception is that if an instrument meets the definition of a cheque (a bill of exchange payable on demand and drawn on a bank ) and is not payable to order (i.e. if it just reads "pay John Doe") then it is treated as a negotiable instrument. UCC Article 3 does not apply to money, to payment orders governed by Article 4A, or to securities governed by Article 8. Persons other than

1794-496: The promise or order, if it: (1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to

1840-570: The reign of the Tang dynasty in the 8th century. In about 1150 the Knights Templar issued an early form of bank notes to departing pilgrims in exchange for a deposit of valuables at a local Templar preceptory in a European country, which could be cashed by the pilgrim concerned on arrival in the Holy Land, by presenting the note to a Templar preceptory there. In the mid-13th century,

1886-445: The requisite offer and acceptance and conveyance of consideration. The underlying contract contemplates the right to hold the instrument as, and to negotiate the instrument to, a holder in due course , the payment on which is at least part of the performance of the contract to which the negotiable instrument is linked. The instrument, memorializing: (1) the power to demand payment; and, (2) the right to be paid, can move, for example, in

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1932-606: The softas led several uprisings, threatening the stability of the Ottoman state. Many softas who graduated and remained unemployed joined the Janissary army to engage in the revolts. Riots by softas were also frequent in Constantinople during the second half of the nineteenth century, most notably in 1853, 1859 and 1876. Shortly thereafter, though, the influence of this mob as a force of political disturbance diminished, as

1978-436: The transferee to become the party to the contract through a contract assignment (provided for explicitly or by operation of law) and to enforce the contract in the transferee-assignee's own name. Negotiation can be effected by endorsement and delivery ( order instruments ), or by delivery alone ( bearer instruments ). Promissory notes and bills of exchange are two primary types of negotiable instruments. The following chart shows

2024-471: The ulama were able to sway the masses into supporting certain campaigns, influence the actions and rulings of the sultan and be representatives of the population before the state. Although anyone could enroll in the madrasa system, election to the ulama class became increasingly organized and highly stratified. The softas struggled to compete for positions against those from the city who were born into ulama families or had personal relationships with members of

2070-434: The ulama. These ties, passed down through generations, were central to the recruitment and selection process of the ulama and superseded consideration of a candidate's skill. In fact, those with hierarchical connections were often less trained and educated in religious studies than the softas, and did not need to complete the madrasa system to be elected to a high post. Still, there was a sense of superiority amongst those from

2116-515: The use of bills of exchange in English statutes dates from 1381, under Richard II ; the statute mandates the use of such instruments in England, and prohibits the future export of gold and silver specie , in any form, to settle foreign commercial transactions. English exchange law was different than continental European law because of different legal systems; the English system was adopted later in

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