ZAMBIAN OPEN UNIVERSITY

SCHOOL OF LAW

NAME : TARISAI GURAJENA

STUDENT NO : 22010388

COURSE : COMMERCIAL LAW

ASSIGNMENT NUMBER : TWO

YEAR OF STUDY : 2.2

QUESTION. Lubi and Taonga are students of commercial law at Zambian Open University.
They understood that their exam was coming within two weeks and hence decided to plan a
discussion session every evening. During their discussions, they came across a piece of cloth
with the following statement,

“I promise to pay the bearer K20,000 on demand”

Bilu and Temba took time arguing to the nature of instruction this was in relation to
negotiable instruments. Using relevant authorities and two draft samples if any, help Temba
and Bilu to resolve their argument.
INTRODUCTION

Commercial law is simply legal rules that determines the rights and commerce and govern
disputes arising out of ordinary transaction of buyers and sellers, and also settles issues that
concerns the affreighment, banking, insurance etc.1 This assignment endeavours to render
help to Lubi and Taonga pertaining there argument over a piece of cloth they came across if
it’s a negotiable instrument or not and to draft two samples if any.

NEGOTIABLE INSTRUMENT

A negotiable is defined as a chose in action, the full and legal tittle to which is transferable
by mere delivery of the instrument with the result that complete ownership of the instrument
and all the property it represents passes free from equities to the transferee, providing the
transferee takes the instrument in good faith and for value. 2 In other words it is a document
that carries or conveys financial instructions. In Crouch v Credit Foncier of England3,
Justice Blackburn stated that:

“When an instrument is by the custom of the trade transferable, like cash by delivering
and is also capable of being sued upon by the person holding it pro tempore, then it is
entitled to the name of a negotiable instrument and the property in it passes to a bonafide
transferee for value, although the transfer may not have taken place in market-overt.”

A negotiable instrument use polite words like pay and not conditional words. Instructions on
a negotiable instrument must be clear. They should not be ambiguous. The media has a duty
to interpret instructions accordingly, in an event were they feel that the instructions are
ambiguous, they have the right not to accept it. For example in a situation where there is an
inquiry on the instruction, the instruction is referred to the author for clarification. There are
many types of negotiable instruments and this includes a bill of exchange, promissory note,
cheques and many more.4

A bill of exchange is used to procure credits, particularly in sale of goods.5 It is also used for
settling bills.6

1
www.bussinessdictionary.com
2
Malila M.(2006). Commercial Law in Zambia: UNZA Press
3
(1873)LR 8 QB 374
4
Malila M.(2006). Commercial Law in Zambia: UNZA Press
5
Professor Furnstone. M. (2001). Principles of Commercial Law (2 nd ed) Cavendish Pushing Limited: London
6
Rawlings P.(2007). Commercial Law. University of London Publishing Press
Promissory note are recent than bills of exchange. They are used to limited sense in
international trade.7 And cheques are widely used in Zambia and they are more recent.

THE BILL OF EXCHANGE

The bill of exchange is governed by the Bill of Exchange Act 1882. The definition of a bill of
exchange is seen or rather a bill of exchange is defined in section 3 of the Bill of Exchange
Act. Section 3 of the Bill of Exchange Act provides that:8

3. (1) A bill of exchange is 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
on demand or at a fixed determinable future time a sum certain in money to or to the order of
a specified person, or to bearer.

(2) An instrument which does not comply with these conditions, or which orders any act
to be done in addition to the payment of money, is not a bill of exchange.

(3) An order to pay out of a particular find is not unconditional within the meaning of
this section; but an unqualified order to pay coupled with; (a) an indication of a particular
find out of which the drawee is to re-emburse himself or a particular account to be debted
with the amount or; (b) a statement of the transaction which gives rise to the bill, is
unconditional.

(4) A bill is not invalid by reason

(a) That it is not dated

(b) That it does not specify the value given, or that any value has been given therefor;

(c) That it does not specify the place where it is drawn or the place where it is
payable.

It should be taken into consideration that not all cheques are bill of exchange. The following
is an example of a bill of exchange:

7
Connolly M .(1998). Briefcases of Commercial Law, (2 nd ed), London: Cavendish Publishing Furnstone, M and
Chuah J (eds) (2010). Commercial and Consumer Law, England
8
The Bill of Exchange Act
 K15,000,000 MANSA
21st August, 1998
Two months after date pay to the order of Chama chibesa chisanga the sum of fifteen
thousand kwacha for value received.
Esnart Musonda
To: chisanga Agatha
Plot 1314 kamwala
Lusaka.

In this regard, the cloth that Lubi and Taonga came across appears not to be a negotiable
instrument. This is because cannot be recognised by the media which happens to be the bank.
Therefore, the cloth cannot be said to be a negotiable instrument because the instructions on it
are conditional and a negotiable instrument need not to be conditional. The instruction that
was on the piece of was that, “I promise to pay the bearer K20.000 on demand”. This
statement is conditional and it is the same statement that is on the Zambian kwacha. Money is
what holds the value itself not an instrument. Money can easily move from one person to
another without any endorsement.

A non-negotiable instrument is an unconditional promise in writing made by one person to

another. It is signed by the maker engaging to pay the payee (the beneficiary) either on
demand or at a fixed or determinable future time. Most promissory notes are non-negotiable
hence the term promissory note comes from the word promise.9

The promise must be unconditional. The nature of this requirement is seen in the case of
Bavin & Sims v London and South Western Bank 10, a document stated; “provided that the
receipt form at the foot here of a duly signed.” It was held to be conditional, and thus the bill
was not valid. On the other hand in the case of Nathan v Ogdens11, the instruction contained
at the foot of the words, “The receipt at the back hereof must be signed”. It was held that, as
the words were not addressed to the bank, but to the payee, the bank was unconditional, and
the instruction was a cheque.

9
https://www.quora.com
10
(1900) 1 QB 270
11
(1905) 93 L. T. 553
The valid example of a non-negotiable instrument is a Zambian kwacha. The illustration
below shows a K2 one of the Zambian notes;

Negotiable instruments are different from currency notes. Cash easily make the transaction
quickly or rather immediately but not a negotiable instrument at they include a term, “Holder
in due course” which states that they can claim the amount in future but is not immediate.
And it requires one to endorse the instrument in order to make an authorisation. Hence, it is
not a negotiable instrument.
CONCLUSION

A negotiable is defined as a chose in action, the full and legal tittle to which is transferable by
mere delivery of the instrument with the result that complete ownership of the instrument and
all the property it represents passes free from equities to the transferee, providing the
transferee takes the instrument in good faith and for value. A negotiable instrument need not
to be conditional and it must be clear. Therefore, a document cannot be a negotiable
instrument if it has conditions.
BIBLIOGRAPHY

Connolly, M. (1998). Briefcases of Commercial Law, (2nd ed), London: Cavendish Publishing
Furmstone, M and Chuah, J.(eds) (2010). Commercial and Consumer Law. England.

Malila, M. (2006). Commercial Law in Zambia: Cases and Materials. UNZA Press.

Professor Furmstone, M. (2001). Principles of Commercial Law, (2nd ed) Cavendish

Publishing limited: London.

Rawlings, P. (2007). Commercial Law. University of London Publishing press.

STATUTES

Bill of Exchange Act 1882

CASES

Crouch v Credit Foncier of England (1873) LR 8 QB 374

Bavin & Sims v London and South Western Bank (1900) 1 QB 270

Nathan v Ogdens (1905) 93 L. T. 553

OTHER SOURCES

www.businessdictionary.com

https://www.quora.com