MRL4801

LAW OF NEGOTIABLE INSTRUMENTS

Holder:

According to S1 of the BEA, a ‘holder’ means the payee of indorsee of a bill who is in possession of it, or the bearer thereof.

Issue:

According to S1 of the BEA ‘issue’ means the first delivery of a bill, complete n form, to a person who takes it as a holder.

Acceptance

Acceptance is defined in s1 of the BEA as follows: “Acceptance [means] an acceptance completed by delivery or notification”. A clearer definition is given in S 15(1) of the BEA, which provides that: The acceptance of a bill is the signification by the drawee of his assent to the order of the drawer”.”

A cheque is generally not accepted

Delivery:

“Actual or constructive transfer of possession from one person to another”

A chequeis defined in s1 of the BEA as “a bill drawn on a bank payable on demand”.

If the definition of a bill (provided above) is combined with that of a cheque in s 1, the definition of a chequewould then be the following: a cheque is an unconditional order in writing, addressed by one person to a bank,signed by the person giving it, requiring the bank to whom it is addressed to pay on demand a sum certain inmoney to a specified person or his order, or to bearer.

A bearer is any person in possession of a bill payable to bearer

Three differences between Section 58 and 79

Section 58 of the BEA applies both to crossed and uncrossed cheques. This position over laps with S79 which may only be relevant if the drawee bank pays in accordance with the crossing, but negligently (s 58 requires a payment ‘in good faith’ and in the ordinary course of business). A further difference between S79 and S58 appears from the provision in S58. According to the proviso, S58 does not afford protection if the forged endorsement purports to be that of a customer of the particular bank branch on which the cheque was drawn. S79 does not contain this limitation. S79 protects not only the drawee bank, but also the drawer of a crossed cheque.

a)A is the drawer, if the cheque has come into the hands of the payee, drawer A shall be protected , under S79 “ as if the cheque has been made to the true owner thereof.”

b)C is the true owner, has the right of recourse against the thief only. The true owner of a lost or stolen cheque therefore is in an unfavorable position.

c)E endorsed the cheque and delivered it to X (who is a holder in due course), he can claim payment from E by virtue of S53 (2) (b). E by endorsing the cheque is “precluded from denying to a holder in due course the genuineness and regularity in all respects of the drawer’s signature and all previous endorsements”. E is not really the endorser because there was forged endorsement, but in terms of this section he will be regarded as one therefore he is called “endorser by estoppel”.

a)If E fails to present the bill for payment he will loose the right of recourse in terms of S43, if he fails to present the bill for payment and such failure is not excused or dispensed with in terms of S44.

b)Where a Bill is dishonored for non-payment and the holder fails to give notice of the dishonor. In terms of S46 notice of dishonoring of the bill must be given to the drawer and each endorser of the bill in these circumstances. Any drawer or endorser to whom notice is not given will be discharged. It will also not be necessary for E to give notice of the dishonor by non-payment in this case.

Currently, there is not legislation which applies specifically to travelers cheques. If a document qualifies as a bill of exchange or promissory note as defined in the BEA, the provisions of the Act ill regulate the relationships on the document. In order to answer this question, a distinction is drawn between, on the one hand, those travelers cheques in terms of which payment by the issuer of the travelers’ cheques in terms of which payment by the issuer of the travelers’ cheque is made conditional on countersignature by the traveler, and on the other hand, those travelers cheques in terms of which payment by the issuer of the travelers cheque is not made conditional on countersignature by the traveler.

In the case of the former, it foes not confirm the essential element of unconditionally as required by the Act. If payment of the travelers’ cheque by its issuer is subject to a condition that it must be countersigned by the traveler it is not unconditional as envisaged in the act.

In the case of those travellers’cheques in terms of which payment by the issuer of the travellers’cheque is not conditional on countersignature by the traveler, it would appear that the travelers’ cheque does qualify as a bill of exchange envisaged in the Act. It must be noted however that the vast majority of travellers’cheques belong to the former type f travellers’cheques.

I would advise Mr. A that for his monthly rent he should use a Stop order as a method of payment because it is usually used for a regular fixed payment which never changes. Mr. A would give payment instruction to his bank to pay the fixed rental with a mandate. The creditor would not derive any rights to change the amount, only Mr. A would be able to do this. With regards to Mr. A’s water and electricity Bill I would advise to pay by means of a debit order which is typically used for a varying amount such as a telephone, water and electricity which are subject to increase or even decrease. A debit order is is not onkly a mandate to the bank to pay but also authorization to the creditor to request payment from the bank.

(i)

  • Published editions
  • Musical works
  • Sound recordings

(ii)Copyright can subsist in a work which infringes another copyright work. The mere fact that the translation is an unauthorized adaptation will thus not preclude copyright, from subsisting in the translation. Provided the work meets the inherent and formal requirements from the subsistence of copyright, it will attain copyright protection independently from the original work. Copyright will vest in the maker or creator of the work which is Themba. The nature of copyright in the translation will be the same as that of other literary works, but it should be noted that every time Lerato exploits his work, she will infringe copyright in Themba’s original work.

(iii)Fair dealing: with regard to literary, musical and artistic works etc, the following acts shall not constitute copyright infringement:

Fair dealing with a work for,

-for the purpose of research or private study or for the purpose of

Personal or private use.

-for the purpose of criticism or review of that work

-For the purpose of reporting current events by means of a newspaper, magazine or similar periodical.

Therefore Lerato may not rely on far dealing as a defence.

a)The author of a computer program is the person who exercised control over the making of the computer program. Therefore Mark as well as Cindy are authors of the program as Cindy exercised control over Mark and assisted him in the more difficult parts of the programs.

b)The employer namely ‘RedYellowBlue software (Pty) Ltd is the owner of the copyright. As the work was made in the course of the author’s employment by another person under the contract of employment.

c)As a general rule, a copyright enjoys protection for a period of 50 years calculated from the end of the year in which the author of the work dies. This means that a work enjoys copyright protection for the lifetime of the author plus 50 years.

d)A flowchart is classified as a “literary work”.

a)this question deals with the possible infringement of XYZ (pty) Ltd’s “REVOLUSION” trade mark.

Section 34 of the Trade Marks Act applies here. One of the acts that does constitute an infringement of a registered trademark, and that may be prohibited, is the unauthorized use in the course of trade of an identical or confusingly similar mark in relation to goods or services for which the trade mark is registered (s34 (1)(a)). Whether a mark is or is not confusingly similar to a registered trademark can be determined only after a due consideration of the sense (meaning), sound and appearance of the two marks. An application of this tests shows that “REVOLUTION” and “REVOLUSION” have a marked similarity. Also the two marks are used in relation to identical goods, namely alcohol. Accordingly, infringement has taken place, ands ABC will be able to apply for an interdict to prevent S from using the mark “REVOLUSION” in respect of alcohol.

b)Section 10(6) prohibits the registration of a well-known foreign trade mark in respect of good and services identical or similar to the goods and services in respect of which the trade mark is well known and where such use is likely to cause deception or confusion. From the facts, it appears that the trade mark “REVOLUTION” has not been registered in South Africa but is well known due to their sponsorships of major sporting events. Any use of the same or similar name by XYZ will be likey to cause confusion. Accordingly ABC can prevent XYZ from registering their trade mark in respect of alcoholic beverages in South Africa.

a)The legal object is unlawful competition

b)This question relates to the element of wrongfulness as a requirement for liability under the private law of competition. The wrongfulness here lies in James’ infringement of Easyway’s corporate identity and trade secrets. The requirement for boni mores must be considered. James’s conduct is directed at destroying Easyway’s business through using their trade secrets, copying their corporate identity etc. it is clear that James conduct is wrongful.

c) Passing off and Misappropriation of a competitor’s trade secrets or confidential information

d)Misappropriation of a competitor’s trade secrets or confidential information. Obtaining and using the information is unlawful.

To qualify as a trade secret, the information must be confidential and have economic value. This means the information must not be generally available to or known by others. It must also be of value to its holder, Customer lists, business connections etc qualify as some trade secrets that James took from Easyway Airways. (Coolair Ventilator Co v Liebenburg)

HOLDER IN DUE COURSE (HIDC)

Must have been a holder to whom a cheque has been negotiated

  • that is complete and regular on the face of it
  • before its due date
  • without notice that it has been dishonoured in the past
  • without knowing of any defect in title of the person who transfers the cheque to him
  • in good faith
  • for value

Advantage of a being holder in due course:

  • relative defences may not be raised against a holder in due course as HIDC holds cheque free from equities (rights not affected by previous defective title eg. Breach of contract, fraud, undue influence, illegal consideration). Can enforce payment against all parties
  • absolute defences may be raised against a HIDC eg. Lack of capacity, forged or unauthorised signature

Absolute defences

  • Relates to the document itself
  • S 20(1) the defence that the defendant lacked capacity
  • A defendant may also claim that his signing of the document should not be seen as a valid and legal actbecause such was obtained by visabsoluta(by force without his consent)

S21 no person is liable as drawer, acceptor or endorser of the bill if he has no signed it as such. A HDC willaccording to S22 not be able to hold a defendant liable, where a signature is forged or unauthorised, because

  • such signature is wholly inoperative
  • A bill or an acceptance was materially altered without the defendants consent. The defendant will in effect onlybe liable on the document, as it existed in its original form.
  • The non est factum- where a person signs a document unaware that it is a negotiable instrument, or that it willbe used as such. The signer of the document must not have created the impression either negligently orintentionally that he binds himself on it

Relative defences

  • S 36(b) a HDC “holds the bill free from any defect in the title of prior parties, as well as from mere personaldefences available to prior parties among themselves, and may enforce payment against all parties liable onthe bill”
  • S 36 (c)(i) if a holders title is defective, the HDC obtains a good and complete title to the bill
  • 2 types of defences that may not be used against a HDC: the defence of a defect in title (defence in rem)and a mere personal defence (defence in personam) they may be defences against others, but not against theHDC
  • Nemo plus iuris- one cannot transfer more rights than one has- is not applicable to a HDC in the context ofrelative defences (it does however, apply in the context of absolute defences)

A draws a cheque on B Bank in favour of C or order as payment for a pair of Oakley sunglasses. C delivers the sunglasses to A. Three days later A notices that the sunglasses are “Oakies”, not Oakleys. A countermands payment.

May C hold A or B Bank liable?

A’s liability:No. C did not act in good faith.

Because C is a holder of the cheque (the payee in possession), A may raise both relative and absolute defences against C’s claim for payment. C breached his contract with A by delivering a counterfeit pair of sunglasses. This breach of contract is an example of a relative defence that may be raised by A against having to pay C.

B’s liability: None. B is not liable on the cheque and acted in accordance with client (A’s) instructions.

Suppose that immediately after delivering the sunglasses to A, C uses the cheque to pay a debt that he owes D. C endorses the cheque in favour of D and delivers the cheque to D. May D hold A liable?

What kind of cheque is this? An order cheque.

Is D a holder?Yes, D is a holder, as he is the endorsee in possession of an order cheque.

Is D a holder in due course?

Yes, he is the holder in due course because the cheque has been negotiated to him and he is the holder of the cheque (+ assuming that all the other requirements were met).

Is A liable to D?

Yes, A may not raise the defence that C (in breach of his contract) delivered counterfeit sunglasses to A, because D is a holder in due course. Therefore relative defences may not be raised against him. D’s rights are not affected by a previous defective title – C’s breach of contract to A/fraud.

The similarities and differences between a bill of exchange and a cheque

A cheque is a special kind of a bill of exchange, and with a few important exceptions, the general provisions relating to bills apply. It is clear fromsection1of the BEA that, in order for a bill to qualify as a cheque, two important qualifications must be met:

  1. The order to pay must always be addressed to a bank.
  2. it must be payable on demand.

The similarities and differences between a bill of exchange and a promissory note

This definition corresponds, in several respects, with the definition of a bill. The important

differences are that:

  1. A bill is an unconditional order given by one person to another while a promissory note is an unconditional promise made by one person to another.
  2. In a bill the order to pay is addressed to a third person, whereas in a promissory note the maker of the note promises to make payment.

Traveller’scheques and the bills of exchange act

•There is no legislation which applies specifically to traveller’scheques

•Whether a traveller’scheque amount to a bill of exchange, cheque or a promissory note as described in the BEA. Important question because if a document qualifies as a bill of exchange or promissory note as defined in the BEA, the provisions of the act will regulate the relationship on the document. However, if a document does not satisfy the definition of a bill of exchange or promissory note, the parties to the document cannot rely on the provisions of the act

•2 types of traveller’scheques:

  1. Traveller’scheque in terms of which payment by the issuer of the traveller’scheque is made conditional on countersignature by the traveler- does not conform to the essential element of Unconditionality as required by the BEA
  2. Travellerscheques in terms of which payment by the issuer of the traveller’scheque is not made conditional by the countersignature by the traveler- conforms to the requirements of a bill of exchange as envisaged in the BEA

A bill of exchangeis defined in s 2(1) of the BEA as follows: [a] bill of exchange is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to a specified person or his order, or to bearer.

Bill of exchange

There need not be three different persons, since the drawer and the payee (A draws a bill on B in favour of A) orthe drawee and the payee (A draws a bill on B in favour of B) may be one and the same person (s 3(1)). But atleast two different persons must be parties to the bill, since s2 (1) of the BEA requires a bill to be an orderaddressed by one person to another.

The drawer is the person who gives the written order that a sum of money be paid. He draws the bill and must signthe bill as drawer.

The drawee is the person to whom the order to pay is addressed. As soon as the drawee signs the bill, that is, assoon as he accepts the drawer's order by placing his signature on the instrument, he is called the acceptor.

The payee is the person to whom payment must be made - he is the person whom the drawer names on the bill asthe person in whose favour the bill is drawn.

A bearer is any person in possession of a bill payable to bearer

Cheque

The same parties as a Bill, since a cheque is essentially, a bill of exchange. Except the drawee of a cheque must, however, always be a bank.

Apart from the rights of the holder (pg 17), the HDC enjoys the following additional rights:

S 36(c)(i) if the title on a bill is defective and a holder negotiates it to a HDC; the HDC obtains a good and complete title on it. A draws a cheque on B band in favour of C or bearer. X, a thief, steals the cheque and negotiates it to D who is a HDC. D now has a valid title against A, B bank and C. C (who was the owner of the cheque) cannot claim the value from D

S58

  • Aimed at the protection of the bank where it has paid someone who is not the holder
  • The position at common law is that a bank is obliged to pay cheques to the holder, if it pays some other person, it may not debit the customer’s account and must shoulder the loss itself
  • The bank must make payment under the circumstances that meet the requirements of S58. if these requirements are met, the payment by the bank will be deemed to be payment in dues course notwithstanding the fact that payment was made to the non-holder.

Requirements of S58: