Chapter 2 专业 PPT/ 商演示设计制作 Instruments

Review Question 1 : What’s the meaning of international settlement? Question 2 : How about the evolution of international settlement? How about the evolution of international settlement? Question 3 : How to establish a correspondent banking relationship?

What is a instrument?  In a narrow sense, a instrument is a written document that contains an unconditional promise by the drawer to pay the payee or an unconditional order by the drawer to the drawee to pay the payee a fixed amount of money at a definite time.  In this chapter, we focus on the narrow sense instruments: bills of exchange, promissory notes and cheques.

Characteristics of instruments Non-causative nature Negotiability Requisite in Form Presentment Unconditional promise or order to pay Returnability Characteristics

What is a bill of exchange ?

 A bill of exchange is an unconditional order in writing, addressed by one person (the drawer) to another (the drawee), signed by the person giving it,requiring the person to whom it is addressed to pay on demand, or a fixed or determinable future time a sum certain in money to or to the order of a specified person, or to bearer (the payee).

What is a bill of exchange ?

Essentials to a bill of exchange 1 、 The word “exchage” 7 、 Signature of drawer 5 、 Name and address of drawee 4 、 Date and place of issue 6 、 Name of payee 2 、 An unconditional order & 3 、 Pay a fixed amount of money

Parties to a bill of exchange  drawer--the person giving the order to pay  drawee--the person to whom the order is addressed  payee---the person to whom the sum certain money is paid. Basic partiesDerivative parties  Endorser-- a payee or a holder who signs his name on the back of a bill of the purpose of negotiation  Endorsee-- the party to whom the instrument is transferred  Guarantor--the person who guarantees the payment or acceptance of an instrument  Acceptor--the drawee that has accepted a usance bill  Holder– the person who possesses an instrument

Parties to a bill of exchange what is the relationship of these parties in a bill Of exchange ? How do these parties act to a bill of exchange?

Acts relating to a bill of exchange  Sight bill drawer Payee (Endorser) Endorsee (Endorser) Endorsee (Holder) DraweeGuarantor issueEndorse present

Acts relating to a bill of exchange  Issue ： to issue a draft comprises two acts to be performed by the drawer. one is to draw a draft and sign it, the other is to deliver it to the payee.  Endorsement: is made on the back of a bill of exchange. It is an act of negotiation and comprises two acts: one is to sign on the back of a draft, the other is to deliver it to the endorsee.

Acts relating to a bill of exchange Types of endorsement 1 、 Special endorsement （ Endorsement in full ） Special endorsement specifies the person to whom or to whose order the bill is to be payable in addition to the signature of the endorser. Example: Pay to the order of D company For B company, shanghai Signature 2 、 Blank endorsement It shows an endorser’s signature only and specifies no endorsee. If the bill is to be further transferred, mere delivery is required. Example: For A Co., London Signature

Acts relating to a bill of exchange Types of endorsement 3 、 Restrictive endorsement It will prevent the further negotiation of a bill. Example:Pay to A bank only/ Pay to A bank not negotiable For B company, shanghai Signature 4 、 Conditional endorsement Example: Pay to the order of B Co. On delivery of B/L No.125 For A Co., London (Signature) 5 、 Endorsement for collection Example:Pay to the order of D bank for collection

Acts relating to a bill of exchange  Presentation ： Presentation is to be made by the holder to the person designated as drawee for payment if it is a sight bill and for acceptance and payment if it is a time bill. -- Sight draft: Presentation for payment -- Time draft: Presentation for acceptance presentation for payment

Acts relating to a bill of exchange  Acceptence ： acceptance of a bill is the signification by the drawee of a time bill of his assent to the order of the drawer. -- General acceptence ( unconditional acceptence) --Qualified acceptence: conditional acceptence partial acceptence local acceptance qualified acceptence as to time

Acts relating to a bill of exchange  Payment: payment of a sight bill is made when the bill is presented to the drawee and payment of a time bill is made at maturity. -- Paid by payee and acceptance, not by endorser or drawer in recourse. -- Paid at maturity, not before it. -- Paid to holder in good faith, meaning that prior endorsements are real and continuous.  Dishonor: a failure or refusal to make acceptance on or payment of a bill of exchange when presented to the drawee

Acts relating to a bill of exchange  Recourse: that the holder of bills of exchange has the right to claim compensation from the drawer and the endorsers in the event that the bill has been dishonored. When a bill is dishonored, the right of recourse will be accrued to the holder at once. -- the holder must give notice of dishonor to the drawer and all the endorsers for whom the holder may wish to make liable. -- Protest is a formal certificate given by a notary party or other authorized person to evidence that a bill of exchange has been dishonored

Acts relating to a bill of exchange  Gurantee: gurantor engages that the bill will be paid on presentment or accepted on prensentment and paid at maturity.  Acceptence for honour supra protest : When bill is dishonored by non-acceptance, the non-debtor accept the dishonored bill with consent of holder in an attempt against recourse and vindicate the credit of drawer and endorser.  Payment for honor

Classification of a bill of exchange  According to the drawer: Banker’s draft and trader’s draft  According to the acceptor: Banker’s acceptance and trader’s acceptance  According to the tenor: Demand draft/sight draft and time/usance draft  According to whether commercial documents are attached thereto Clean draft and documentary draft

What is a promissory note

 A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to bearer.

Essentials to a promissory note The word “promissory note” An unconditional promise to pay Name of the payee Signature of the maker Place and date of issue Tenor A sum certain in money Place of payment

Types of notes  Trader’s Note (Maker is a firm or a trader) *trader’s low creditworthiness  Bank’s Note (Made by a bank payable to a specified person can be deemed as cash) *commercial banks can only issue notes payable to a specified person  International Money Order (Denominated in US dollars with the maximum amount not exceeding USD2500)

Types of notes  Trader’s Note (Maker is a firm or a trader) *trader’s low creditworthiness  International Money Order (Denominated in US dollars with the maximum amount not exceeding USD2500)  Central Banker's Notes  Negotiable certificates of deposit  Various bonds

Types of notes  Treasury Bill (Government bond with the maker to be the Ministry of Finance) Treasury Bill

Types of notes  Traveler’s Cheque (It is drawn by the issuing bank upon itself payable to a traveler) Traveler’s Cheque

Types of notes  Bank’s Note (Made by a bank payable to a specified person can be deemed as cash) Bank’s Note *commercial banks can only issue notes payable to a specified person

difference between a bill and a note an order to pay three parties time bill needs acceptance drawn in set in case of loss a promise to pay two parties time note needs not Acceptance drawn in one original only A billA Note

What is a cheque

 A cheque is an unconditional order in writing addressed by the customer to a bank signed by that customer authorizing the bank to pay on demand a sum certain in money to or to the order of a specified person or bearer.

Essentials to a cheque The word “Cheque” Unconditional Writing Signed

Types of cheque  According to the order *Demonstrative order; Restrictive order; Bearer order  According to the Drawer *Banker’s cheque; Personal cheque  According to whether or not the Cheque is Crossed *Open cheque; Cross cheque

difference between a bill and a cheque Can be drawn on any one time and sight Present on due date Can only be drawn on banker Only on demand Present within prescribed date

Preview what is the difference among a bill of exchange, A promissory note and a cheque ? To find some ways for a trader to get finance by making use of a bill of exchange against which he can receive payments before due date?

Thank YOU