Historical background of negotiable act
The system related to the instruments which are negotiable is always considered as the point for discussion. At the time when society came into existence, the concept of negotiable instrument was not in existence as the money was not in circulation and the art of writing was also not known to our society. With the system of bartering, a usual medium of exchange and a representative of property was found necessary, so silver and gold were used as the instrument for exchange, which was found to be suitable in all civilized countries and subsequently, and it was the time from when the use of money has come into existence.
In earlier time the robbers and pirates used to rob people who carried out trade which was considered as unsafe as they carry with them all the gold and valuable items. This system continued and the emergence of money also did not solve this problem subsequently the new idea related to the exchange of bills was put forward.
The mercantile community started issuing the Letters of Credit which are known as Bills of exchange, from the merchant of one country to another merchant of other country who was his debtor whereby requiring him to pay the debt to the third person. By this method of the bill of exchange, the people used to do their trade and pay their debt. The main advantage of the aforesaid instrument was that the people had not to carry the money with them.
The mercantile commercial activities had been legislated by the law relating to the negotiable instruments by which huge importance to those instruments of credit were granted which were assumed to be converted into money and could be transfer form one person to other and also from one banking institution to the other institutions. In this system the community of the mercantile used to do payment just based on the delivery of the instrument.
The importance of the negotiable instrument increased due to the expansion of trade. If such laws were not there it would be difficult to carry out the trade in the world at the contemporary level and would have adverse effect, as the carrying of currency in bulk is very unsafe, infeasible and unworkable.
The negotiable instrument can be smoothly and comfortably convey from one person to other even from one country to other as they are associated with the quality of redeemable, convertible and the exchangeable. There are several types of negotiable instruments which the law recognizes and out of which cheque is deemed to be one of the most reliable as well as secure and reliable mode of payment all over the world, specially in the realm of business transactions.
The law of negotiable instrument is just not restricted to one demographic area or the nation as it is law for the commercial word whereby it involves certain principles relating to equity and usages which are used for the convenience of the merchants all over the world. The legal provisions in Europe in respect to aforesaid general principles are similar. Though on various questions different countries have solve the problem in their own way but the precondition of laws remain same which are essential for carrying the huge transaction among the different countries.
The main purpose of the laws relating to negotiable instrument was to ease the business and to give validity to those instrument of credit which can smoothly be converted into currency and comfortably convey from one person to other involved in the trade and the commerce. In the absence of the instruments of credit it would be difficult to do the transactions in terms of money as the carrying of currency is very difficult . Before the money came into existence the bartering system was used for carrying out the trade. By this method the credit were being converted to the negotiable instrument for the account of legality.