Negotiability is a very important concept in international commerce and is generally associated with payment and fiscal matters. In the course of its evolution and development, certain documents have come to be accorded negotiable status e.g. the bill of exchange.
However other documents that are not directly concerned with the monetary or fiscal aspect of trade have also come to be conferred with negotiable status as a result of mercantile practice and custom. In commercial parlance, the Bill of lading is regarded as quasi-negotiable primarily because of its transferable status as a document of title. This attribute of the bill of lading has made it very attractive to traders and remains the most prominent factor for its indispensability in international commerce.
Over the years the use of paper documents (particularly the bill of lading) in international commerce became burdensome due to the numerous defects and disadvantages associated with the use of paper as a medium of communication. The practice of using Bill of lading particularly became associated with delay of the goods and perhaps even more alarming, fraud, due to the mercantile practice of issuing bills in sets of originals.
The concerns associated with the use of paper in international commerce led to the emergence of the move towards the dematerialization of documents using electronic technology. The incursion of electronic technology in the area of commerce has since metamorphosed and is now subsumed under one generic heading titled 'Electronic commerce'. This technology aims to achieve a paperless environment in any commercial or business transaction using the Internet and any other electronic but related technology.
Today, a very high level of dematerialisation has been achieved by electronic means and it is possible to transact business without the use of paper. The paper bill of lading has not been spared by this revolution and virtually all its functions have been usurped by electronic means. However the negotiability of the bill of lading remains an issue in spite of the tremendous electronic developments made.
What then is a negotiable instrument and what are its attributes? How does the Bill of Lading derive its negotiability? Can negotiability be achieved in the light of the electronic simulation of the functions of the bill of lading? What progress has been made in the journey towards negotiability of the electronic bill of lading?
This paper offers an overview of the concept of negotiability in relation to the electronic bill of lading.
"With the advent of new technology, securities are becoming dematerialised or immobilized in depository institutions; negotiable instruments are giving way to electronic fund transfers; physical cash will soon be displaced by the electronic purse; the paper-based bill of lading and letter of credit may one day be consigned to oblivion"
Professor Roy Goode1
The Essence Of Negotiability
The concept of negotiability is an offspring of commercial necessity. It developed principally in response to the need by merchants to avoid carrying large sums of money over long distances due to the difficulties and dangers involved2. The rationale behind negotiability was simplicity personified in the sense that it allowed for the recognition of an ordinary piece of paper to be accorded negotiable status and constituting an authority to pay to the holder a sum certain on a fixed date and time. This concept of recognition coupled with the certainty that it would be honoured when presented properly provides the framework and the central, organising theme for the law of negotiable instruments.
A true negotiable instrument must be capable of the following:
(i) It must be capable of being transferred and without notice.
(ii) It must be capable of passing a full and legal title that is free from all equities upon delivery to a subsequent holder.
(iii) Its negotiable status must be ascertainable by an examination on the face of the document without the additional burden of referring to any other document.
(iv) The words contained on the document constitutes a formal promise against the maker and becomes liable to be performed if the promisee relies on it in good faith.
(v) The document and the promise contained thereon constitute an independent transaction that is autonomous and isolated from the transaction that generated its use.
(vi) In view of the foregoing, it becomes pertinent that the instrument be tangible and capable of physical manifestation of the intangible promise3. Thus it must be a physical item that can be dealt with in any manner.
The bill of exchange offers the best illustration of a negotiable instrument. It enjoys all the attributes of negotiability and is very...