The Study On The Legal System Of Bill Endorsement

Negotiable instruments, once called as "commercial currency" by Marx, play a vital role in the commercial transactions, and fulfill an irreplaceable function. What's more, it is an indispensible instrument which the market economy cannot depart from. As one of basic laws adjusting market economic relations, the law of bill constitutes one of the three pillars supporting the function of market economy with the law of company and the law of contract as another two. The life of bill lies in its circulation. Promoting circulation is the superior principle of the law of bill. The perfect degree of the bill circulation system is a key factor determining success or failure of a law of bill. The circulation of bill depends on its repeated and continuous transference. Although in theory bill rights can be transferred by both endorsement and pure delivery, the former one is more principal and fundamental. To some extent, there will be no bill circulation if there were no bill endorsement, let alone the legal system of negotiable instruments in the modern sense. Consequently the system of bill endorsement becomes a core element of the law of bill.The significance of negotiable instruments towards economic life relies on its crucial economic functions and effects such as payment, exchange, credit, financing, etc. Although the emergence of various modes of payment and exchange has exerted a negative effect on the traditional payment and exchange functions of bill, bill's credit and financing functions cannot be paralleled and substituted by other modes of payment. Especially as the financing function of bill has attracted wide attention by all countries around the world, bill has become the most important financing instrument in the modern economic conditions. The so-called bill financing mainly refers to the instrument parties mobilizing and circulating funds by means of bill discount, bill transference and bill pledge. And either bill transference by endorsing or bill discount or bill pledge is mainly achieved through the means of bill endorsement.As a chief method of bill transference, bill endorsement needs a certain extent of theoretical support. Three basic theories supporting bill endorsement are composed of theories of the transference of creditor's rights, the principle of abstractness and right appearance in civil and commercial law. The right of bill is a sort of money obligatory rights in nature, and its circulation in theory falls into the sphere of the transference of creditor's rights in civil law. However, based on bill's essential quality of circulation, the transference of bill rights by endorsing is different from the general assignment of creditor's rights. The Civil Law does not encourage civil subjects to transfer general creditor's rights, so its system design focuses more on protecting obligatory rights assignors'interests. On the other hand, the law of bill treats facilitating bill circulation as its first mission. So its system design lays more emphasis on strengthening the protection of bill rights assignees'interests with a view to facilitating bill's convenient, fast and efficient circulation. Therefore, the transference of bill rights by endorsing does not involve noticing debtors as a prerequisite to its effect's operation. The assignor (endorser) must assume the statutory guarantee responsibility for the assignee (endorsee) and all other subsequent parties. And the assignee of bill rights generally does not bear the prior assignor'defects in bill rights. The debtor cannot commonly use the reasons of counterplea between him and the assignee's prior party to defense the assignee. That is totally distinct from the general assignment of creditor's rights, because it is required that the latter shall not have an effect on the debtor until noticing him, and once the creditor has assigned the obligatory rights, he will be out of the old relations of credit and debt and will not assume the guarantee responsibility and the debtor can use the reasons of counterplea between him and credit assignor to defense the assignee. The rules for the transference of bill rights by endorsing are designed to enhance the protection of the assignee and to facilitate the circulation of bills.The abstract principle (Abstraktionsprinzip) in the civil and commercial law was initiated by German scholars, which mainly refers to the abstract nature of legal act. In German law, abstract act mainly includes act of disposition and abstract act of creditor's right. Real right behavior in the act of disposition and bill conduct in the abstract act of creditor's right are commonly accepted as representative abstract acts. Although many countries do not recognize the abstract nature of real right behavior, the bill law theory and legislation of the countries universally recognize the abstract nature of bill conduct. The abstractness of bill endorsement as one of bill conducts has manifested itself mainly in that endorsement shall independently take effect if it accords with formal requirements stipulated by the Law of Bill, and in principle will not be affected by the effectiveness of its primary relationship. The debtor cannot use the reasons of counterplea between him and the prior endorser to defense the subsequent endorser. Although our Law of Bill does not expressly stipulate the abstract principle, the specific rules reflect the abstract requirement, and also judicial interpretation of the Supreme People's Court has expressly stipulated the abstract principle. Considering the ambiguity of the current Law of Bill and the disputes in theory and practice as well as making reference to the experience of legislation in other countries and areas,"promotion for the negotiation of bill" should be added to Article1of the Law of Bill while Article10be deleted to avoid misunderstanding and clarify the abstract principle in legislation.The negotiable nature of bill requires that bill endorsement shall adopt the theory of right appearance. There is a concrete and detailed design for bill endorsement in the Law of Bill for the sake of identification and transaction, which does not allow parties to alter with negotiation. The content and validity of endorsement can only be confirmed by the record on the bill, and no one can explain or change the content of the endorsement according to particulars that does not demonstrate on the bill. The solemnity and literary attributes entitle bill rights to the objective and certain appearance and enhance the efficiency of identification and transaction between parties. That is the reflection of the theory of right appearance on the bill endorsement.The legal system of bill endorsement is an organic one made up of a series of rules based on the behavior of bill endorsing, mainly including two aspects of bill endorsement rules of formation and validity. As far as the formative rules are concerned, there is few rule on blank endorsement, and the legal nature and validity of endorsement where "value in pledge" is written are neither clear. Furthermore, there is no basic rules on the essentials of establishment of electronic bills. Rules of blank endorsement should be added to the general principles to take place of the judicial interpretation which confirms the validity of blank endorsement. Article30of the Law of Bill should be revised as "when a bill of exchange is transferred by endorsement or when the exercise of certain part of the rights thereon is endorsed to another, it is full endorsement if the endorser has recorded the endorsee; it is blank endorsement if the endorser did not record the endorsee." It should be explicitly provided that the payer shall assume the obligation of formal examination and need not to carry through examination as to substance. Article57of Law of Bill should be revised as "when the payer or his agent pays, he should examine the continuity of endorsement on the bill of change and examine the legal identification paper or valid documentation of the person to whom the bill is presented for payment but need not to examine whether the signature or seal on the endorsement is true or false". When a bill is set pledge, the endorsement and "Value in pledge" shall be written as the establishment requirement. When the Supreme People's Court formulates the judicial interpretation on Property Law, it should be clarified that regulations on the pledge of bill in the Law of Bill should be given priority to implement.As to validity rules of bill endorsement, problems existing in the current rules are mainly referred to as follows:the relationship between bill endorsement and the transference of bill rights is not clarified; the validity rules of bill endorsement are too general and the nature of endorsers'guarantee responsibility is also indeterminate; the rules of endorsees' responsibility are not in harmony with those of bona fide acquisition of bill rights; validity rules of endorsement on overdue bills are logically contradictory; the definition of endorsement continuity is still not comprehensive; there is no specific rules on the situations of endorsement continuity, the concept and morphology and validity of endorsement discontinuity; the limitation on the endorsees'endorsement rights and the lack of validity rules of electronic bill endorsement, etc. From the aspect of substantive rules on bill endorsement, the Law of Bill should explicitly provide that bill rights can be transferred by both endorsement and pure delivery, in which the former is more principal and fundamental. Two articles can be added to the general principles, respectively providing for the transference of bill and blank endorsed bill, which may be specifically stated as that "bill can be transferred by endorsement or delivery; bearer paper can be transferred merely by pure delivery";"blank endorsed bill may be transferred by delivery or by blank endorsement or full endorsement. If the last endorsement is blank endorsement, the holder may record himself or others as endorsee to change it into a full endorsed bill for transference." The Law of Bill should also define the legal responsibility of bill forgery, and Article14paragraph1should be revised as "the record on the bill shall be authentic and shall not be forged or modified. If a person has forged or modified the signature or seal or other particulars on the bill, he shall assume legal liability rather than liability under bill. The person who is forged will not assume the responsibility under bill." The rules on the writing-off of endorsement should be added to the general principles for the sake of the parties'convenience to use bill, which can be stipulated as "the writing-off of the signature and seal or the particulars specified on a bill, which is not deliberately done by holders shall not affect the validity of a bill. The writing-off in the preceding paragraph refers to deliberately smearing or eliminating the signature or seal or the particulars specified on a bill". And two articles shall be set in the part of endorsement, one of which is to regulate validity of writing-off on endorsement continuity,"when the writing-off does not affect the endorsement continuity, it should be deemed as no record as to the endorsement continuity". The other is to regulate the validity of writing-off on the endorser,"when the bill holder deliberately writes off the endorsement, the endorser who is written off and endorsers ranking behind that endorser who endorsed before the writing-off shall be exempt from the liability of the bill". The specific situations and legal consequence of endorsement discontinuity should be explicitly stipulated and Article31paragraph1of the Law of Bill should be revised as "where a bill of exchange is transferred by endorsement, the endorsement should be in succession. The holder can prove his rights thereon by the continuity of endorsement; the holder shall provide evidence according to law to prove his rights thereon if the endorsement is not in succession". Paragraph2should be revised as "the continuity of endorsement in the preceding paragraph refers to that in the bill transference, the signatures and seals of the endorser (assignor) who transfers the bill of exchange and the endorsee (assignee) should be in consecutive sequence on the bill of exchange and the first endorser and the payee should be the same person; and the bill holder and the last endorsee on the bill shall be the same person."The validity of the bill right transference, right certificate and right guarantee should be specified and that the endorsee can obtain the bill rights by valid endorsement should be expressly provided, despite the defects in the authenticity of the endorsement by the endorser, it does not affect that the endorsee obtains the bill right by bona fide acquisition. The subsequent endorser shall be responsible for his prior endorser's authenticity stipulated in Article32Paragraph1of the Law of Bill should be deleted so as to cohere with the regulation on the bona fide acquisition of bill rights stipulated in Article12. The statutory guarantee responsibility for the endorsee assumed by the endorser should be expressly defined which may be subject to some limitations of the parties'agreement. The endorsee's right of endorsement shall be further clarified as that the endorsee can endorse, but the endorsee of endorsement of pledge or trust drawing money can only endorse for trust drawing money but not to endorse for transference or endorse for pledge. Article35of the Law of Bill should be revised as "the endorsee is entitled to negotiate the entrusted rights of bill where "consignment collection" is written. Bill of exchange can enact pledge;"value in pledge" should be written on the bill. The endorsee may negotiate the rights on the bill when exercising his right of pledge according to law. The re-endorsement of the endorsee of the pledge endorsement and the endorsement of trust drawing money shall be limited to the endorsement of trust drawing money." The current regulation on the overdue endorsement shall be revised to clarify that overdue endorsement cannot have the same effect as delivery by endorsement but only the general effect of assignment of debts. Article36of the Law of Bill should be revised as "A bill of exchange may not be negotiated by endorsement, if it is not accepted or paid or if the time limit for presentment for payment expires. If it is negotiated by endorsement, there should be the general effect of transference of ordinary creditors' rights".With respect to the formation and validity rules of electronic bills and their application, there is no need to stipulate a single Law of Electronic Bill in the present, and the conditions of adding a specific article to the Law of Bill are neither satisfied. The more practical method is to make an extensive interpretation of related legal regulations and to perfect it by supplementing related articles. It is advisable to add a new paragraph to Article2of the Law of Bill so as to make a definition of the concept of electronic bills, and to regulate that "electronic bills shall apply this law except other laws have stipulated otherwise." On the basis of the current regulations of Article7of the Law of Bill, a new paragraph can be added that "both electronic signature and handwriting signature or seal have the same legal effect" which can match Article14of the Law of Electronic Signature,"both reliable electronic signature and handwriting signature or seal have the same legal effect", in order to clarify the legal status and effect of electronic bill signature. On the basis of Article20regulating bill delivery, a new paragraph can be added that "other laws and regulations shall be abided by if they have rules on bill delivery." in order to solve the legal effect of electronic bill delivery. As a result, electronic bill can be adopted by the scope of adjustment of the current Law of Bill to satisfy the requirement of the development of the electronic bill business.