The invention of money marks a great advance in the technology of trade. Money is something which has a standard value. It counts the same whatever it is exchanged for, whether that is wool or pigs, clothes or shelter, labour or personal services. Anything which people are prepared to pay for can be given a money value.

Money can also be hoarded more efficiently than most other things. It is made so that it does not rot or rust or go out of fashion, though it can lose its value through inflation. It can easily be made to produce a...

In ordinary language the word ‘instrument’ has many meanings. Even as a technical legal term its meaning ranges from a tool used for housebreaking to a piece of subordinate legislation. Here, though, it simply means a written document, signed but not sealed, which shows who owns money; in legal language ‘an instrument under hand which is a document of title to money’. Some instruments, such as warehouse receipts, are documents of title to goods not money but they are not instruments in the sense used here. The value which an instrument represents can be easily transferred from one person to...

Individuals and companies open bank accounts of different kinds for different purposes. You may want to save regularly and decide that a savings account will give you acceptable interest while allowing you to withdraw freely as you need the money. You may prefer to get a higher rate of interest by giving up some of that freedom to withdraw for a period. You will then have a long-term deposit account, and you will forfeit interest if you withdraw within the term. But most bank accounts are current (meaning ‘running’) accounts. The account holder, the customer, is provided with a cheque...

‘Indorse’ means ‘write on the back’. The word is more commonly spelled ‘endorse’ but the spelling of BOEO is preferred in this book to show that the word is being used not in its general sense but with the meaning it has in the context of negotiable instruments. A bearer cheque needs no indorsement. It is negotiated merely by delivery, that is transfer of possession. But an order cheque needs something in addition to delivery. It must be indorsed. BOEO s32 deals with indorsement comprehensively.

If an indorsement is to work, that is if it is to operate as a...

As previous chapters have shown, liability on a cheque can fall on the drawer, who draws it, or anyone who indorses it, the indorser. Remember that the whole point of a cheque is to represent money and to give to a person who is in rightful possession of it a right to that amount, without any reference to any transaction which gave rise to the debt. The cheque stands on its own as an independent instrument incorporating the right of its holder to payment.

The drawer is the person who by signing the cheque form creates the cheque and becomes...

The general rule is that a forgery has no effect. Forgery is a crime: the making of a false document in order that it may be used as genuine with intent to defraud or deceive. A forged document is illegal and usually a nullity. But if there were no exceptions to that rule the usefulness of negotiable instruments would be greatly reduced. Some balance must be struck between the interests of all the parties involved. The law does this through the provisions of BOEO.

BOEO s24 sets out the basic rules which strike the balance:

Subject to the provisions of...

Every day in Hong Kong, ordinary people, companies large and small, and the government draw between them about a quarter of a million cheques. Compared with that figure, the number of bills of exchange seems tiny, but that does not mean that bills of exchange are commercially unimportant. Moreover, few of the cheques are, or are intended to be, negotiated. Many of the bills are. This chapter will describe their uses, characteristics and the important differences from cheques.

From its foundation, Hong Kong has been concerned with international trade. At first the import-export companies had to handle the bills of...

Though this book is about cheques, the most important of banking instruments, it was necessary to discuss in Chapter 7 the special characteristics of bills of exchange. There are also instruments besides cheques and bills which, though of less importance, need to be understood; and there are modern devices which, though not instruments at all, are so popular that they are likely to supplant cheques and bills. Yet despite their influence, they can only be mentioned in outline and in conclusion in a book about cheques.

Some of these instruments are, like cheques and bills, orders to pay, in which...