On Drawee's Legal Status And Legal Liabilities Under Negotiable Instrument

This paper, commencing with a case review, deals primarily with drawee's legal status and legal liabilities under negotiable instruments.A drawee stands in a unique position in the relationship formed under a negotiable instrument. Although it is well known that a drawee who accepted a negotiable instrument ranks as the primary debtor in sequence to pay under it, however, neither Chinese Law on Negotiable Instruments nor legal scholars provide clear-cut answer as to the legal status of a drawee who made no acceptance to a negotiable instrument. The author of this paper, after extensive collection and search of relevant legal materials, finally concludes that Mr.Yu Qunzong's viewpoint in this regard is of most acceptable. Mr. Yu, a legal scholar of old China, stated: " A drawee who made no acceptance to the negotiable instrument is not simply a third party. His payment under the negotiable instrument produces same legal effect as the payment done by an acceptor." The author also points out that it is inappropriate to treat the drawee of a banker's draft as being identical with the drawer of the same in Chinese Law on Negotiable Instruments.As to drawee's legal liabilities, this paper focuses on what result from drawee's gross negligence and malice and discusses in details how to interpret gross negligence and malice as well as bona fide payment. Also, the issue who shall bear the legal risk related to forged negotiable instruments is addressed and the fairness and rationale to ask the drawee to bear the legal consequence incurred from wrong payment due to his failure to recognize the forged negotiable instruments are examined.In the last part of this paper, the corresponding proposals to perfect Chinese payment system under negotiable instruments are presented. It is proposed in this paper, among others, that negotiable instruments escrow system shall be added to the current Chinese Law on Negotiable Instruments; some provisions of current Chinese Law on Negotiable Instruments, such as the provision asking for full amount payment and prohibiting delay payment and the provision asking for presentation of certificate of dishonor by drawee, shall be modified; and the standards employed to decide the liabilities resulting from...