Tuesday, August 25, 2020

Types of Negotiable Instruments under the Commercial Code

 Types of Negotiable Instruments under the Commercial Code

Ethiopian law has adopted a very broad definition and types of negotiable instruments. Art 715, after defining negotiable instruments, states that the law in particular recognizes three types of instruments as negotiable; these are;

  • Commercial instruments
  • Transferable securities
  • Document of title to goods


How do you evaluate the terminology used in Art 715(2) which states “in particular”? Does it mean that there is a possibility that an instrument apart from the three categories may also qualify as negotiable instrument? If yes, what other instruments can you mention outside of the three named instruments?

 Compare the types of negotiable instruments recognizable under Indian and American law with those enumerated in art 715(2) what difference (s) can you suggest regarding their scope?

The three main types of negotiable instruments mentioned in art 715(2) should first be defined and classified to understand their exact nature and meaning.

Commercial instruments

Commercial instruments usually referred to as commercial papers could be shortly defined as instruments other than cash, entitling the payee or the holder payment of a specified amount of money. A closer definition is given in Art 732(1) of the commercial code which reads:

“Commercial instruments are negotiable instruments setting out an entitlement consisting in the payment of a sum of money”

From Both definitions one can clearly understand the exact scope of commercial papers. The right contained in a commercial instrument is always payment of money and money only. An instrument entitling the holder to property rights or any other right than a sum of money could not qualify as a commercial paper. Even though Art 732 (1) clearly indicates the true nature of commercial papers i.e. their entitlement of the holder to payment of a sum of money, contradicts itself by the wider recognition it gives to the different types of commercial instruments in Art 732 (2). This Article, enumerating the types of commercial instruments states “Bills of exchange, promissory notes, cheques, traveler’s cheques  and warehouse goods deposit certificates” shall be considered as   commercial instruments under the  code. A travelers cheque is a different type of cheque  hence, the classification can be reduced to four categories i.e. bills of exchange, promissory notes, cheques and warehouse goods deposit certificates.


What is a warehouse goods deposit certificate? see arts 2813-2824 of the civil code. clearly this instrument does not fall under the definition given to commercial   instruments in art 732(1). Explain why a warehouse goods deposit certificate can not be considered as a commercial instrument?

Bills of exchange, promissory notes and cheques are regarded as commercial papers in most jurisdictions. A definition and a specimen of these in strummers is given herein below. The best way to define any negotiable instrument is through the basic elements constituting it’s validity. The commercial code without providing any formal definition, enumerates the basic requirements of bills of exchanges, promissory notes and cheques in art 735, 825 and 827 respectively. At this stage without going to the detail requirements of each instrument  we shall summarize each element and attempt to generally provide common requirements

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