Common Law Rule….

“ Nemo Dat Quod Non Habet “

(No one can give that; which he has not got)

Negotiable Instruments are outside this rule………………………………..

In negotiable instruments the full and legal title is transferred either by simple delivery or by endorsement and delivery  of the instrument….. And the receiver may get a better title to the instrument than what the possessed by the giver had..

(For this to happen the receiver must be a Holder in due course)

Who is a Holder

‘Payee’ or ‘Endorsee’ of a cheque, who is in possession of it… or ‘Bearer’.
Payee       –  Who is entitled for Payment.
Endorcee – A person who receives a cheque after endorsement-who also has further right to endorse the                    instrument.
Bearer      - The person who has the possession.

Who is a Holder in Due Course……

(Section 2 of BOE Ord.)

Complete & regular on the face of it.

Must not be overdue.

Must have given value himself.

Must have taken it in good faith.

Must have no notice of previous dishonor.

Must have no notice of prior defect in title.

Cheque must be negotiated.

No one can be a HIDC..

With forged signatures.

Crossed “Not Negotiable”

Endorsed “Pay …………………… only”

 

Please Note………………

Payee can not be a Holder in due course….

 

WHY………………..??

 

Since it is not negotiated to him but only issued to him.

By

Sanjeeva Pieris