Convention on International Bills of Exchange and International Promissory Notes

 

Article 21

(1) If an endorsement contains the words “for collection”, “for
deposit”, “value in collection”, “by procuration”, “pay any bank”, or
words of similar import authorizing the endorsee to collect the
instrument, the endorsee is a holder who:

(a) May exercise all rights arising out of the instrument;

(b) may endorse the instrument only for purposes of collection;

(c) Is subject only to the claims and defences which may be set up
against the endorser.

(2) The endorser for collection is not liable on the instrument to any
subsequent holder.

Article 22

(1) If an endorsement contains the words “value in security”, “value in
pledge”, or any other words indicating a pledge, the endorsee is a holder
who:

(a) May exercise all rights arising out of the instrument;

(b) May endorse the instrument only for purposes of collection;
(c) Is subject only to the claims and defences specified in article
28 or 30.

(2) If such an endorsee endorses for collection, he is not liable on
the instrument to any subsequent holder.

Article 23

The holder of an instrument may transfer it to a prior party or to the
drawee in accordance with article 13; however, if the transferee has
previously been a holder of the instrument, no endorsement is required,
and any endorsement which would prevent him from qualifying as a holder
may be struck out.

Article 24

An instrument may be transferred in accordance with article 13 after
maturity, except by the drawee, the acceptor or the maker.

Article 25

(1) If an endorsement is forged, the person whose endorsement is
forged, or a party who signed the instrument before the forgery, has the
right to recover compensation for any damage that he may have suffered
because of the forgery against:

(a) The forger;

(b) The person to whom the instrument was directly transferred by
the forger;

(c) A party or the drawee who paid the instrument to the forger
directly or through one or more endorsees for collection.

(2) However, an endorsee for collection is not liable under paragraph
(1) of this article if he is without knowledge of the forgery:

(a) At the time he pays the principal or advises him of the receipt
of payment, or

(b) At the time he receives payment, if this is later, unless his
lack of knowledge is due to his failure to act in good faith or to
exercise reasonable care.

(3) Furthermore, a party or the drawee who pays an instrument is not
liable under paragraph (1) of this article if, at the time he pays the
instrument, he is without knowledge of the forgery, unless his lack of
knowledge is due to his failure to act in good faith or to exercise
reasonable care.

(4) Except as against the forger, the damages recoverable under
paragraph (1) of this article may not exceed the amount referred to in
article 70 or 71.

Article 26

(1) If an endorsement is made by an agent without authority or power to
bind his principal in the matter, the principal, or a party who signed
the instrument before such endorsement, has the right to recover
compensation for any damage that he may have suffered because of such
endorsement against:

(a) The agent;

(b) The person to whom the instrument was directly transferred by
the agent;

(c) A party or the drawee who paid the instrument to the agent
directly or through one or more endorsees for collection.

(2) However, an endorsee for collection is not liable under paragraph
(1) of this article if he is without knowledge that the endorsement does
not bind the principal:

(a) At the time he pays the principal or advises him of the receipt
of payment, or

(b) At the time he receives payment, if this is later, unless his
lack of knowledge is due to his failure to act in good faith or to
exercise reasonable care.

(3) Furthermore, a party or the drawee who pays an instrument is not
liable under paragraph (1) of this article if, at the time he pays the
instrument, he is without knowledge that the endorsement does not bind
the principal, unless his lack of knowledge is due to his failure to act
in good faith or to exercise reasonable care.

(4) Except as against the agent, the damages recoverable under
paragraph (1) of this article may not exceed the amount referred to in
article 70 or 71.

CHAPTER IV. RIGHTS AND LIABILITIES

Section 1. The rights of a holder and of a protected holder

Article 27

(1) The holder of an instrument has all the rights conferred on him by
this Convention against the parties to the instrument.

(2) The holder may transfer the instrument in accordance with article
13.

Article 28

(1) A party may set up against a holder who is not a protected holder:

(a) Any defence that may be set up against a protected holder in
accordance with paragraph (1) of article 30;

(b) Any defence based on the underlying transaction between himself
and the drawer or between himself and his transferee, but only if
the holder took the instrument with knowledge of such defence or if
he obtained the instrument by fraud or theft or participated at any
time in a fraud or theft concerning it;

(c) Any defence arising from the circumstances as a result of which
he became a party, but only if the holder took the instrument with
knowledge of such defence or if he obtained the instrument by fraud
or theft or participated at any time in a fraud or theft concerning
it;

(d) Any defence which may be raised against an action in contract
between himself and the holder;

(e) Any other defence available under this Convention.

(2) The rights to an instrument of a holder who is not a protected
holder are subject to any valid claim to the instrument on the part of
any person, but only if he took the instrument with knowledge of such
claim or if he obtained the instrument by fraud or theft or participated
at any time in a fraud or theft concerning it.

(3) A holder who takes an instrument after the expiration of the
time-limit for presentment for payment is subject to any claim to, or
defence against liability on, the instrument to which his transferor is
subject.

(4) A party may not raise as a defence against a holder who is not a
protected holder the fact that a third person has a claim to the
instrument unless:

(a) The third person asserted a valid claim to the instrument; or

(b) The holder acquired the instrument by theft or forged the
signature of the payee or an endorsee, or participated in the theft
or the forgery.

Article 29

“Protected holder”means the holder of an instrument which was complete
when he took it or which was incomplete within the meaning of paragraph
(1) of article 12 and was completed in accordance with authority given,
provided that when he became a holder:

(a) He was without knowledge of a defence against liability on the
instrument referred to in subparagraphs (a), (b), (c) and (e) of
paragraph (1) of article 28;

(b) He was without knowledge of a valid claim to the instrument of
any person;

(c) He was without knowledge of the fact that it had been
dishonoured by non-acceptance or by non-payment;

(d) The time-limit provided by article 55 for presentment of that
instrument for payment had not expired; and

(e) He did not obtain the instrument by fraud or theft or
participate in a fraud or theft concerning it.

Article 30

(1) A party may not set up against a protected holder any defence
except:

(a) Defences under articles 33 (1), 34, 35 (1), 36 (3), 53 (1), 57
(1), 63 (1) and 84 of this Convention;

(b) Defences based on the underlying transaction between himself
and such holder or arising from any fraudulent act on the part of
such holder in obtaining the signature on the instrument of that
party;

(c) Defences based on his incapacity to incur liability on the
instrument or on the fact that he signed without knowledge that his
signature made him a party to the instrument, provided that his
lack of knowledge was not due to his negligence and provided that
he was fraudulently induced so to sign.

(2) The rights to an instrument of a protected holder are not subject
to any claim to the instrument on the part of any person, except a valid
claim arising from the underlying transaction between himself and the
person by whom the claim is raised.

 

Author: international

Mentioned in these Entries

Convention on International Bills of Exchange and International Promissory Notes.