Thesis On The Exercise Of The Right Of Defense By The Underlying Debtors Of Negotiable Instruments

The Law on Negotiable Instruments, as a very important act in civil and commercial legal system of our country, put emphasis on the protection of parties'lawful rights and interests. Its formulation and implementation are of important meaning for the purpose of establishing legal relationship involving negotiable instruments, regulating acts involving negotiable instruments, protecting lawful rights and interests of parties to negotiable instruments, promoting healthy development of activities involving negotiable instruments, maintaining market credit and social economic order, and promoting development of market economy. Based on long term practice, the Law on Negotiable Instruments has concluded the right of defense therein, which together with the right of claim for payment and the right of recourse interacts with each other, balances each other, and jointly protects debtors'rights and interests involving negotiable instruments in a fair and effective manner, ensures safety of transaction involving negotiable instruments. However, the negotiable instruments market of our country is still in developing and people have limited affordability to negotiable instruments. It's a long way for us to formulate a law which could demonstrate the maximum effectiveness principle involving negotiable instruments from all direction. For the purpose of promoting circulation of negotiable instruments as much as possible, better exerting the negotiable instruments functions of circulation and financing, this thesis put emphasis on the discussion of exercising the right of defense by debtors of negotiable instruments, the categories of such right of defense and respective preconditions of exercising such right of defense. Furthermore, this thesis has provided the analysis of restrictions set upon the debtors'exercising of such right of defense. Based on the comprehensive analysis of the theory in connection with the right of defense by debtors involving negotiable instruments, this thesis has, through analysis of certain specific cases, concluded the discussion of difference between the right of defense by debtors involving negotiable instruments and the right of defense by debtor existing in common civil law. Based on the aforesaid, this thesis has proposed certain suggestions and views.The first part of this thesis has discussed the applicable conditions to exercise the right of defense by debtors involving negotiable instruments. In the study of the theory with respect to negotiable instruments, scholars are used to understand the right of defense involving negotiable instruments from the angle of civil law other than the angle of right. Then, only the defense activity involving negotiable instruments has been defined while the right of defense involving negotiable instruments has not been directly defined. Actually, the right of defense involving negotiable instruments enjoyed by debtors is the legal basis of the defense activity involving negotiable instruments. They are the"source"and"result". Therefore, the first part of this thesis has firstly defined the defense activity involving negotiable instruments and the right of defense involving negotiable instruments respectively. Following the definitions, this thesis has discussed the categories of the right of defense enjoyed by debtors involving negotiable instruments and the applicable conditions to exercise each category of the right of defense.The second part of this thesis has compared in detail the right of defense enjoyed by debtors involving negotiable instruments with the right of defense in civil law. The relationship of claim and defense between creditors and debtors also exist in civil law, provided however, such relationship has not been deemed as an issue for specific purpose. The defense involving negotiable instruments is derived from the defense system in common credit law of civil law while has important difference with the defense of common credit and could not be simply subject to the defense system of civil law. For the purpose of exercising the rights involving negotiable instruments and civil rights in a correct manner, the defense involving negotiable instruments and the defense in civil law shall be contrasted and distinguished. The second part of this thesis has analyzed the differences between the defense involving negotiable instruments and the defense in civil law from the following five aspects: (i) the basis of legal principal; (ii) the function with respect to the serving purpose; (iii) denying the rights of claimers; (iv) restrictions upon the occurrence of defense; and (v) restrictions upon the defense of civil law and the defense involving negotiable instruments.The third part of this thesis has discussed the effect on the liability on a negotiable instrument when a debtor exercises his right of defense involving negotiable instruments. Our country is in the period of economy reforming, socialistic market economy system is being gradually established and not completed. The corresponding practice with respect to negotiable instruments is inevitable to endure a winding development. In particular, the use and promotion of commercial bill of exchange once got into trouble, and the main reason is that the debtors of negotiable instruments are of poor credit; in order not to take responsibility of relevant negotiable instruments, debtors with poor credit proposed unreasonable defenses with all kinds of excuses, which resulted in a lot of overdue payment issues and disputes in connection with negotiable instruments. Such situations not only infringe credit of negotiable instruments but also disturb the commodity transaction order to a greater extent. For the purpose of making clear of the liabilities on negotiable instruments, it's necessary for the Law on Negotiable Instruments to provide liabilities on negotiable instruments to make clear that who is debtor involving negotiable instruments, what conditions shall be subject to when liabilities are taken and under what conditions the right of defense shall not be exercised. When defense involving negotiable instruments comes into force, it changes the liabilities of claimed parties signing on a negotiable instrument. Such change may mean the release of liabilities involving negotiable instruments, or the change of obligations, including, among others, the creditors and due date.The forth part of this thesis has analyzed in detail the restrictions upon the exercising of the right of defense enjoyed by debtors involving negotiable instruments. An instrument provided in Law on Negotiable Instruments is negotiable security and word-written security. In case that debtors are permitted to use items not included in an instrument as the reason to exercise the right of defense, creditors to such instrument are easy to feel unsafe, which may affect the use and circulation of instruments. That's the reason why the right of defense shall be restricted. Based on the analysis of the restriction set upon the exercising of the right of defense enjoyed by debtors involving negotiable instruments, this thesis has further discussed the exceptions regarding the same and compared such restrictions set upon the exercising of the right of defense enjoyed by debtors involving negotiable instruments with the legal system of bona fide acquisition.The current effective Law on Negotiable Instruments has included corresponding defense system involving negotiable instruments and endowed the debtors the right of saying"No". However, why the debtors are able to say"No", how to say"No"in accordance with applicable laws and regulations, how to treat the right of saying"No"during judicial judgments, such problems are all pressing to be resolved in theory study and judicial practice. Although the defense system involving negotiable instruments is not mature and completed, and with the extensive use of negotiable instruments and the implementation of the Law on Negotiable Instruments, disputes involving negotiable instruments resulted from the defense and relevant litigations will be more and more, however, we still believe that with the development of market economy, a lot of judicial practices is inevitable to richen and develop the theory of defense involving negotiable instruments and make the defense system more mature and perfected. Meanwhile, the defense system involving negotiable instruments shall be exerted its functions during the development of our country's market economy.