On Defenses Of Negotiable Instruments

The defense of negotiable instruments, a quite special system in the law of negotiable instruments, is established for the benefit of the debtor of negotiable instruments, which allows the debtor to exertion the right to refuse the obligation of negotiable instruments, which is a foundation to strengthen negotiable instruments'circulation.There are many differences between the defense of negotiable instruments and that in civil law, such as the limitation on negotiable instruments.According to the traditional method of category, the defense of negotiable instruments can be divided into the personal defense and the real defense, which have many advantages and disadvantages. Personal defenses usually relate to the transaction resulting in the transfer of the instrument and include failure of consideration, breach of warranty. Real defenses involve more serious matters that go to the existence of the instrument. They include forged signature of the maker or drawer, illegality and lack of capacity.Therefore, a discussion of some new ways of category is conducted in this paper, and a new thinking on defenses of negotiable instruments is that can be divided into the defense in substantive law and the defense in pure procedural law. Based on the model category, the cause of defenses of negotiable instruments is discussed in this paper. However, to facilitate the flow of commerce the transferee of negotiable instruments needs to be given greater protection and assurance of payment. He should be insulated from most of the defenses that the maker or drawer might have against the payee.To accomplish this, the statutes provide that if a hold of a negotiable instrument is a hold in due course, he take the instrument free from all the defenses in substantive law of the parties to the instrument.To quality as a holder in due course, the transferee must meet the following requirements. Firstly, he took the instrument from a holder. Secondly, he took the instrument for value. Thirdly, he took the instrument in good faith, which is defined as honesty in fact in the conduct or transaction concerned. If a person takes an instrument under circumstances that clearly indicate a defense to the instrument, he dose not take it in good faith. Finally, he took the instrument without notice of its defect.To establish the regulation, the law of negotiable instruments do not give the debtor the right to refuse the obligation, if the debtor is not a holder in due cause.There are many reasons to establish the limitation on defenses of negotiable instruments, between these, the choice of the substantive negotiable instruments right and the pro forma negotiable instruments right made by the legislation is the main reason. It is considered that the substantive negotiable instruments right is protected generally, but it will be limited if it is harmful to the flow of commerce.