Tuesday, August 25, 2020

Requirements for Negotiability: Unconditional promise or order to pay

 Requirements for Negotiability: Unconditional promise or order to pay

(Art 735(b), 823(b),827(a)

For an instrument to be negotiable, it must contain an express order or promise to pay. A promise is simply a pledge to transfer money. For the purpose of negotiable instruments a promise must be express and unconditional. A mere acknowledgement of debt, which might logically imply a promise, is not sufficient to constitute valid promise. The promise must be an affirmative, not acknowledgment.


“Ato Zinabu, I.O.U Br 1,000”. Here I.O.U stands for , “I owe you.” This is only an admission of indebtedness or acknowledgement of debt. There is no promise to pay and there fore the instrument is not a promissory note.

Question 11

 is the following a valid promissory note?

“I promise to pay br 1,000 to the order of Ato Adunga (the seller) for the purchase goods from him.”

 Order which is associated with three party instruments i.e.. Bill of exchange & cheque can be defined as command to another to transfer money. An order instrument orders, or directs, a third party to pay the instrument as drawn. It must be more than an authorization or request.

When the drawer issues a cheque, the word pay (to the order of a payee) is a command to the drawee bank to pay the cheque deducting from his account when presented. The order is mandatory, but sometimes it may be written in a courteous form with words “please pay” or” kindly pay”. The bottom line is the language used by the drawer must be a precise and express one.

Question 12.

Is the following instrument a cheque?

                       Commerical Bank of Ethiopa

                                 Harar Branch

                      I wish you would pay Ato Amsalu Birr 1,000 or order.

                                                                                         Gelila Tilahun                                                                                        


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