Key Traits of Negotiable Credit Instruments

Essential Characteristics

1. Incorporation

   The rights are tied to the writing. The instrument contains a right given by the document. Possession of the writing evidences the right.

2. Legitimation

   The person holding the instrument has the power to demand payment of the credit within.

3. Accuracy

   The terms of the instrument cannot be modified or amended from the moment of its creation.

4. What is accurately written in the text of the instrument becomes the right.

5. Autonomy

   The instrument is born when it is drafted and negotiated by its original maker.

   1. There is a personal relationship between the maker and the first holder. This repeats as it transfers from one hand to another.

   2. The instrument becomes more abstract, autonomous and independent from the reasons it was created.

   3. Only personal exceptions prevail, not those based on the cause. The instrument is enforceable against any obligor through personal exceptions.

6. Abstraction

   1. Credit instruments are detached from the cause of their creation. The act or contract has no legal effect over the right of the new holder.

   2. Abstraction, with autonomy, gives a full and independent right to the new holder. The reason for its creation has no legal effect.

Negotiability of Credit Instruments

A negotiable instrument must indicate if it is payable to order or to bearer. This shows the maker's intention to issue a negotiable instrument.

1. To bearer

2. To order

3. Nominative

UN Convention (1988 by the UNCITRAL)

Its main objective is to establish a modern, self-contained international legal regime that would apply worldwide.

Previous attempts at unifying the law of negotiable instruments had limited results.

For example, the conventions at The Hague in 1910 and 1912 adopted the Geneva Uniform Laws for Bills of Exchange, Promissory Notes and Checks that resulted in the harmonization of these instruments laws of only part of the civil law world. This UN Convention came into effect also to common law countries