Source: https://chilot.me/knowledge-base/book-iv-negotiable-instruments-and-banking-transactions/
Timestamp: 2020-07-10 15:52:48
Document Index: 81929698

Matched Legal Cases: ['Art. 715', 'Art. 716', 'Art. 717', 'Art. 718', 'Art. 719', 'Art. 720', 'Art. 723', 'Art. 721', 'Art. 722', 'Art. 723', 'Art. 724', 'Art. 725', 'Art. 726', 'Art. 727', 'Art. 728', 'Art. 729', 'Art. 730', 'Art. 731', 'Art. 732', 'Art. 2813', 'Art. 733', 'Art. 734', 'Art. 735', 'Art. 736', 'Art. 735', 'Art. 737', 'Art. 738', 'Art. 739', 'Art. 740', 'Art. 741', 'Art. 742', 'Art. 743', 'Art. 744', 'Art. 745', 'Art. 746', 'Art. 747', 'Art. 748', 'Art. 749', 'Art. 750', 'Art. 751', 'Art. 752', 'Art. 753', 'Art. 754', 'Art. 755', 'Art. 781', 'Art. 756', 'Art. 757', 'Art. 758', 'Art. 759', 'Art. 907', 'Art. 926', 'Art. 1029', 'Art. 1030', 'Art. 791', 'Art. 940', 'Art. 939', 'Art. 938']

BOOK IV NEGOTIABLE INSTRUMENTS AND BANKING TRANSACTIONS - Ethiopian Legal Brief
BOOK IV NEGOTIABLE INSTRUMENTS AND BANKING TRANSACTIONS
Art. 715. – Definitions.
A negotiable instrument is any document incorporating a right to an entitlement in such manner that it be not possible to enforce or transfer the right separately from the instrument.
The law recognises in particular as negotiable instrument commercial instruments, transferable securities, documents of title to goods.
Art. 716. – Obligations arising out of negotiable instruments.
The possessor of a negotiable has a right to the entitlement as expressed in the instrument against presentment of the said instrument to the debtor, on condition that he establishes that he is a lawful possessor in the manner provided by law.
The debtor shall only pay against delivery of the instrument.
Except in case of fraud or gross negligence on his part, the debtor shall be released by payment at maturity to the person to whom the instrument gives the capacity of creditor, notwithstanding that the said person is not the holder of the right.
Art. 717. – Defences.
The debtor may only set up against the holder of the instrument defences based on their personal relations, defences of form and those based on the text of the instrument.
He may set up defences based on falsification of signature, lack of capacity or power of representation at the time of issue of the instrument, or on the absence of the necessary conditions for bringing the proceedings.
The debtor may not set up against the holder of the instrument defences based on his personal relations with preceding holders, unless the holder, in acquiring the instrument, has knowingly acted to the detriment of the debtor.
Art. 718. – Holder in due course.
No claim for recovery may be made against a person who has acquired a negotiable instrument in due course, in accordance with the rules applying to negotiation.
Art. 719. – Forms of transfer.
According to the forms provided for their transfer, negotiable instruments may be to bearer, in a specified name or to order.
Art. 720. – Conversion of instruments.
Negotiable instruments to bearer may be converted into instruments in a specified name by the person issuing them, on the request and at the expense of the possessor.
Except where conversion is forbidden by law or expressly by the person issuing the instruments, instruments in a specified name may be converted into instruments to bearer, on the request and at the expense of the holder, the latter establishing his identity and his capacity in accordance with the provisions of Art. 723 (2).
Art. 721. – Instruments to bearer. Transfer and establishment of right by holder.
An instrument to bearer shall be transferred by delivery of the instrument.
The holder of an instrument to bearer establishes his right to the entitlement as expressed in the instrument by the sole fact of presentment of the said instrument.
Art. 722. – Instruments in a specified name Establishment of right by holder.
The holder of an instrument in a specified name establishes his right to the entitlement as expressed in the instrument by the fact of his designation as beneficiary therein and in the register held by the person issuing the said instrument.
Art. 723. – Instruments in a specified name. Transfer.
Instruments in a specified name may be transferred by the entry or the name of the transferee in the instrument and in the register held by the person issuing the said instrument. They may also be transferred by delivery of a new instrument in the name of the new holder. Such delivery shall be entered in the register.
A person requesting registration of an instrument in favour of another person, or delivery of a new instrument registered in the name of the latter shall establish his identity and his capacity to dispose thereof under the law. If any of these formalities is required by the transferee, the said transferee shall produce the instrument and establish his rights by deed drawn up by a public officer.
The person issuing the instrument shall be liable for making the necessary entries in the register and the instrument.
A person who issues and transfers an instrument under this Article shall be liable only for fault.
Art. 724. – instruments to order. Transfer and establishment of right by holder.
Instruments to order may be transferred by endorsement, followed by delivery of the instrument to the beneficiary under the transfer.
The holder of an instrument to order establishes his right to the entitlement as expressed in the instrument by an uninterrupted series of endorsements, even if the last endorsement is in blank. Cancelled endorsements shall be deemed not to be written. Where an endorsement in blank is followed by another endorsement, the signatory of this last endorsement shall be deemed to have acquired the instrument by the endorsement in blank.
Art. 725. – Forms of endorsement.
An endorsement shall be written on the instrument and signed by the endorser.
An endorsement not containing the name of the endorsee shall be valid.
An endorsement “to bearer” shall be equivalent to an endorsement in blank.
An endorsement shall be unconditional. Any condition to which it is made subject shall be of no effect.
A partial endorsement shall be null and void.
Art. 726. – Effect of endorsement.
An endorsement transfers all the rights arising out of the instrument.
If the endorsement is in blank, the holder may:
fill up the blank either with his own name or that of another person; or
re-endorse the instrument in blank or to another person; or
transfer the instrument to a third person, without filling up the blank and without endorsing it.
Art. 727. – Obligations of endorser.
Unless otherwise provided by law or by the instrument, the endorser shall not be liable where the person issuing the instrument fails to carry out his obligations.
Art. 728. – Endorsement for collection or by attorney.
Where the endorsement contains the words “value in collection,” “for collection,” “by attorney” or any other similar words implying agency, the holder may exercise all the rights arising out of the instrument, but he can only endorse it in his capacity as agent.
The person issuing the instrument may only set up against the agent such defences as could be set up against the principal.
The agency granted by power of attorney shall not terminate by reason of the death of the principal or his becoming legally incapable.
Art. 729. – Endorsement in pledge.
Where the endorsement contains the words “value in security” , “value in pledie” or any other similar words implying pledge, ,the holder may exercise all the rights arising out of the instrument, but his endorsement has the effects only of an endorsement by an agent.
The person issuing the instrument may only set up against the endorsee in pledge such defences as are based on his personal relations with the endorser, unless the endorsee, in receiving the instruments, knowingly acted to the detriment of the debtor.
Art. 730. – Assignment of instruments to order.
Acquisition of an instrument to order by means other than endorsement gives rise to the effects of an ordinary assignment only.
Art. 731. – Negotiable instruments damaged, destroyed, lost or stolen.
The procedure to be followed in the case of negotiable instruments damaged, destroyed, lost or stolen shall he prescribed.
TITLE II. COMMERCIAL INSTRUMENTS
Art. 732. – Definitions.
Commercial instruments are negotiable instruments setting out an entitlement consisting in the payment of a sum of money.
Bills of exchange, promissory notes, cheques, travellers cheques and warehouse goods deposit certificates shall be deemed to be commercial instruments under this Code.
‘I1he provisions of Art. 2813-2824 of the Civil Code shall apply to warehouse goods deposit certificates.
Art. 733. – Legal capacity.
Any person having contractual capacity may bind himself by commercial instrument.
Art. 734. – Signature.
Declarations made by commercial instruments shall bear the signature of the person making them.
Nevertheless, signature may be apposed by a handwritten mark or by mechanical process such as a stamp.
When a physical person is unable to sign, his consent shall be evidenced by an authentic declaration on the instrument.
Section 1. Establishment and form of bills of exchange
Art. 735. – Requirements.
the term “bill of exchange” inserted in the body of the instrument and expressed m the language employed in drawing up the instrument;
the time of payment;
the name of the person to whom or to whose order payment is to be made or an indication that it shall be payable to bearer;
the date when and place where the bill is issued;
the signature of the person who issues the bill (drewer).
Art. 736. – Requirements absent.
Where any of the requirements provided in Art. 735 is absent the instrument shall not be valid ‘as a bill of exchange, except in the cases specified in sub-art. (a), (b) and (c) hereunder,:
a bill of exchange in which the time of payment is not specified shall be deemed to be payable at sight;
unless otherwise expressly specified, the place mentioned beside the name of the drawee shall be deemed to be the place of payment, and at the same time the place of the domicile of the drawee;
a bill of exchange which does not mention the place of its issue shall be deemed to have been drawn in the place mentioned beside the name of the drawer.
Art. 737. – Special cases.
A bill of exchange may be drawn payable to drawer’s order.
It may be drawn on the drawer himself.
It may be drawn for account of a third person.
Art. 738. – Domiciled bill.
A bill of exchange may be payable at the domicile of a third party, either in the locality where the drawee, has his domicile or in another locality.
Art. 739. – Stipulation as to interest.
In a bill of exchange payable at sight or at a fixed period after sight, payment of interest may be provided. A provision as to interest inserted in any other hill of exchange shall be of no effect.
The provision for interest shall be of no effect unless the rate is specified ,
Interest shall run from the dale of the hill of exchange, unless some other dale is specified.
Art. 740. – Discrepancy in the sum payable.
Where the sum payable by a bill of exchange is expressed both in words and figures and there is a discrepancy, the sum expressed in words shall prevail.
Where the sum payable by a bill of exchange is expressed more than once in words or more than once in figures and there is a discrepancy, the smaller sum shall prevail.
Art. 741. – Signature of persons incapable of binding themselves.
If a hill of exchange bears signatures of persons incapable of binding themselves by a bill of exchange, forged signatures, signatures of fictitious persons or signatures which for any other reason cannot bind the persons who signed the bill of exchange or on whose behalf it was signed, the obligations of the other persons who have signed it shall be valid.
Art. 742. – Signature without power to act.
Whosoever signs a bill of exchange on behalf of person for whom the had no power to act shall be bound himself as a party to the bill and, if he pays, shall have the same rights as the person for whom he purported to act. The same rule shall apply to an agent who exceeded his powers.
Art. 743. – Liability of drawer.
The drawer guarantees both acceptance and payment. He may release himself from guaranteeing acceptance. Any provision by which he releases himself from the guarantee .of payment shall be of no effect.
Art. 744. – Bill of exchange in blank.
If a bill of exchange, which was incomplete when issued, has been completed otherwise than in accordance with the agreements entered into, the non-observance of such agreements may not be set up against the holder unless he has acquired the bill of exchange in bad faith or, in acquiring it, has committed a fault.
Art. 745. – Ante or post dated bill of exchange.
A bill of exchange shall not be null and void far the sole reason that it has been antedated or postdated, provided that there is no fraud or illegality.
A person to wham an instrument so dated is delivered is deemed to have acquired it at the date of delivery.
Section 2. Negotiation of bills of exchange
Art. 746. – Negotiability.
A bill of exchange to bearer may be transferred by simple delivery of the instrument.
Any other bi1l of exchange, even if not expressly drawn to order, may be transferred by endorsement. When the drawer has inserted in a bill of exchange the words “not to order” or similar words, the instrument can only be transferred according to the form, and with the effects, of an ordinary assignment.
The bill may be endorsed even in favour of the drawee, whether he has accepted it or not, or of the drawer, or of any other party to the bill.
These persons may re-endorse the bill.
Art. 747. – Elements of endorsement.
An endorsement “to bearer” is equivalent to an endorsement in blank.
Art. 748. – Forms of endorsement.
An endorsement shall be written’ on the bill of exchange or on a slip affixed thereto (allonge). It shall be signed by the endorser.
The endorsement may leave the beneficiary unspecified or may consist simply of the signature of the endorser (endorsement in blank). In the latter case, the endorsement to be valid shall be written on the back of the bill of exchange or on the slip affixed thereto (allonge).
Art. 749. – Effects of endorsement.
If the instrument is in blank, the holder may:
fill up the blank either with his own name or with the name of some other person;
transfer the bill to a third person without filling up the blank and wil1hout endorsing it.
Art. 750. – Guarantee.
In the absence of any provision to the contrary, the endorser guarantees both acceptance and payment.
He may prohibit any further endorsement; in this case he gives no guarantee to the persons to whom the bill is subsequently endorsed.
Art. 751. – Establishment of title by holder.
The possessor of a bill of exchange shall be deemed to be the lawful holder if he establishes his title to the bill through an uninterrupted series of endorsements, even if the last endorsement is in blank. Cancelled endorsements shall he deemed not to be written. Where an endorsement in blank is followed by another endorsement, the person who signed this last endorsement shall be deemed to have acquired the bill by the endorsement in blank.
Where a person has been dispossessed of a hill of exchange, in any manner whatsoever, the holder who establishes his right thereto as provided in sub-art. (1) shall not be bound to give up the bill unless he has acquired it in bad faith or unless in acquiring it he has committed a fault.
Art. 752. – Defences.
Persons sued on a bill of exchange cannot set up against the holder defences based on their personal relations with the drawer or with previous holders, unless the !holder, in acquiring the bill, has knowingly acted to the detriment of the debtor.
Art. 753. – Endorsement by attorney.
Where an endorsement contains the words “value in collection,” “for collection,” “by attorney” or any other similar words implying agency, the holder may exercise all the rights arising out of the bill of exchange, but he can only endorse it in his capacity as agent.
The parties liable can only set up against the agent defences which could be set up against the principal.
Art. 754. – Endorsement in pledge.
Where an endorsement contains the words “value in security,” “value in pledge” or any other similar words implying a pledge, the holder may exercise all the rights arising out of the bill of exchange, but an endorsement by him has the effects only of an endorsement by an agent.
The persons sued on the bill may not set up against the holder defences based on their personal relations with the endorser unless the holder, in acquiring the bill, has knowingly acted to the detriment of the debtor.
Art. 755. – Endorsement after maturity or after protest.
An endorsement after maturity shall have the same effect as an endorsement before maturity. An endorsement after protest for nonpayment, or after the expiration of the limit of time fixed for drawing up vile protest, shall operate only as an ordinary assignment.
Unless the contrary is proved, an endorsement without date shall be deemed to have been written on the bill before the expiration of the limit of time fixed for drawing up the protest.
Where a refusal to pay has been evidenced by a declaration of the drawee in accordance with Art. 781 (2), an endorsement without date shall be deemed to have been made before the protest.
Art. 756. – Presumption as to the place of endorsement.
Unless the contrary is proved, an endorsement shall be deemed to have been written on the bill at the place where the endorsement is dated.
Art. 757. – Presentment for acceptance.
Until maturity a bill of exchange may be presented to the drawee for acceptance at his domicile, either by the holder or by a person who is merely in possession of the bill.
Art. 758. – Order or prohibition as to presentment.
In any bill of exchange the drawer may stipulate that it be presented for acceptance with or without fixing a limit of time for presentment.
Except in the case of a bill payable at the address of a third party or in a locality other than that of the domicile of the drawee or of a bill drawn payable at a fixed period after sight, the drawer may prohibit presentment for acceptance.
He may also stipulate that presentment for acceptance shall not take place before a fixed date.
Unless the drawer has prohibited acceptance, every endorser may stipulate that the bill shall be presented for acceptance with or without fixing a limit of time for presentment.
Art. 759. – Obligation to pres
The contract of deposit of funds results in the opening of an account in which the bank enters by way of credit and debit all transactions carried out with the depositor, or on his behalf with third parties.
Transactions which the parties have agreed to exclude shall not be entered in the account.
Unless otherwise agreed, a deposit of funds shall be at sight and 1Ihe holder of the account may dispose at any time of the whole or part of the balance.
The right of disposal as defined in sub-art. (1) may be made subject to notice or the expiry of a fixed period.
A bank transfer is a transaction by which a bank debits the account of a depositor, upon his written instructions, and credits by its entry another account with the same amount.
The conditions of the issue of transfer order shall be as agreed by the parties. Tranfers to bearer shall not be permitted.
Where the beneficiary under the transfer is required to carry the sum to die credit of a third party, the name of the third party shall appear in the transfer order.
The beneficiary under a transfer obtains title to the sum to be transferred at the time when the bank debits the account of the person who orders transfer.
A transfer order may be cancelled until that time.
The issue of a transfer order as provided in Art. 907 (1) involves final disclaimer of the right of cancellation.
It may be provided that transfer orders shall not be notified directly to the bank but may be presented to it by the beneficiary himself.
It may be provided that certain transfers shall not be entered upon receipt of the direct orders of the person issuing the order or,t he presentation of the instrument of transfer, but only at the end of the day together with all transfer orders coming within the same category received during that day.
A bank shall ensure the custody of the securities and act in relation thereto with, the due care required of a public bailee under the civil law.
Securities may only be surrendered under a transaction requiring such surrender.
Unless otherwise agreed a bank shall collect the amount of interest, dividends, capital repayments, amortisation and any other entitlements arising under the securities deposited as soon all they can be claimed.
Sums collected shall be placed at the disposal the depositor, in particular by entry to the credit of his deposit account.
A bank shall collect free scrip issues and join them to the deposit.
It shall carry out transactions for the safe-keeping of the right arising out of the securities, such as regrouping, exchange, renewal of coupon sheets and stamping.
Transaction which involve the exercise of an option by the owner of the securities shall he notified to the depositor by registered letter, the costs being borne by him.
Where the depositor does not give his instructions in due time, the bank shall transact, on behalf of the depositor, the rights which he has not exercised.
A bank shall restore securities at any time, upon the demand of the depositor, and within the periods of time provided in the conditions of custody and subject to any rights of retention which the bank may he entitled to claim.
Restitution shall he made at the place where the deposit was made. It shall relate to, the titles deposited, unless restitution of different tides has been agreed by the parties or is permitted by law.
Restitution shall only he made to the depositor or those having rights from him or to, the person appointed by him or them, even where the securities indicate that they are the property of third panics.
Securities in a specific name registered in the names of a usufructuary and a bare owner may be validly handed to the bare owner upon production of proof of the death of the usufructuary.
The bank shall take all necessary measures to ensure the upkeep and custody of safes.
In the event of any potential risk .to the security of the safes, the bank shall take all necessary steps to enable the hirers to empty their safes before the risk materialises, even outside working days and hours of business. The bank is not bound to give individual notices to, the hirers.
The bank shall only permit the hirer or his agent to have access to a safe.
The key of a safe shell remain the property of the bank.
In default of payment of the rent for any single ‘term, the contract shall terminate as of right one month after the bank has sent notice by registered letter and the rent has not been paid. At the expiry of this period the bank shall take possession of the safe after calling upon the hirer to be present at the safe on a day and time fixed.
Where a hirer so called upon does not present himself or refuses to give up his safe open with its contents removed and to return the key giving the combination, the said safe shall be forced in the presence of a court official who shall draw up a descriptive report which shall constitute evidence as regards all interested parties.
A contract for a current account is a contract whereby named correspondents agree to enter in an account, by reciprocal and simultaneous remittances, debts arising out of transactions between them and thus to substitute for individual and successive settlements of these transactions a single settlement to be carried to the sole balance of ,the account at its closure.
Where it has been agreed that the remittances of one party shall only begin when the remittances of the other have terminated, or where an examination of the account so indicates, the rules governing current accounts shall not apply.
All debts arising out of the business relations between the correspondents and which are not guaranteed by security by operation of law or under agreement are the subject of remittances into current account, unless it has been agreed that certain of them shall be excluded by general or particular stipulations.
Debts guaranteed by security under agreement, accorded by one correspondent or by a third party, may be entered in current account under a special and formal agreement between the interested parties.
Where given debts deal either with sums of money expressed in different currencies or with non-fungible things, the correspondents may enter them in current account provided that:
they enter the remittances relating thereto under separate heads within which fungibility is required; and
it is provided that the current account shall retain its unity, despite the material division into several heads.
In this case, all the balances under the different heads must be capable of being converted, in order to be merged so as to show a sole balance at a time fixed by the correspondents and in no case later than the closure of the current account.
A current account which has been opened without specifying its duration may be closed at any time if a correspondent so desires, subject to the time limits for notice provided or, where not provided, customary.
A current account which has been opened for a fixed period shall be closed at the expiry of the term or earlier by agreement between the correspondents.
A current account shall be closed in any event by the death of one or other of the correspondents, or by his becoming legally incapable or bankrupt.
Unless otherwise provided in the agreement made under Art. 926 (2), the product of the security originally relating to a debt entered in current account shall be carried forward up to the amount of the contingent balance of the account, without regard to changes which might arise in the books until closure.
Such carry- forward may only be set up against third parties if it has been published in accordance with the rules of civil law for the preservation o~ the said security.
Debts entered in current account shall not be subject to the rules applying thereto in respect of prescription and interest.
The provisions of civil law shall apply toprescrip1lion of the balance after closure.
Remittances shall bear interest at the rate provided by the correspondents, or in, the absence of such provision, at the rate fixed under the Civil Code.
Unless otherwise agreed and until closure of the account this interest shall itself bear interest from the day of this remittance into account, provided that this remittance shall be made in accordance with the intervals of time fixed under the Civil Code.
Where one of the correspondents becomes bankrupt, any security under agreement on ibis property established during the period provided in Art. 1029 of this Code, by way of guarantee of the contingent debit balance of the current account, may not be set up against the estate insofar as, at the time the said security was established, the current account already showed that correspondent as a debtor.
This security may be set up against the estate as regards the surplus, if any, of the debit balance of the account on the day of closure over this debit position, subject to the provisions of Art. 1030 of this Code, if applicab1e.
The sequestration of a current account may be effected at any time on the credit balance, in accordance with the provisions of the Civil Procedure Code.
Such sequestration shall not prejudice such rights as the debtor’s correspondent may enjoy with respect to this credit under an agreement by which the debtor has relinquished the free disposal at any time of this credit balance.
Where the yield on discount of commercial instruments has been entered in current account and the instruments have not been paid on presentment, of the instruments may, even after the remitter is dec1arod bankrupt, contra transfer these instruments, that is to say carry to the debit of the account a sum equal to the nominal amount of the instruments together with the costs provided in Art. 791.
In the event of the bankruptcy of die remitter, contra transfer is only permitted in respect of instruments unpaid at the date of maturity; any agreement to the contrary shall be disregarded.
Where, after contra transfer, the current account shows a credit balance in favour of the remitter who has become bankrupt, the receiver shall restore the contra transferred instruments.
Where, after contra transfer, the current account shows a debit balance to the remitter who has become bankrupt, the receiver may retain the instruments, irrespective of the date of maturity.
The receiver may, in the case provided in sub-art. (2), accumulate the sums collected by him from persons jointly and severally liable, as a result of his exercise of the rights and securities arising out of the contra transferred instruments, with the dividend in the bankruptcy collected by him for, the balance owing to his account drawn up after contra transfer, subject however to the provisions of Art. 940.
The receiver may in no case take as a result of the accumulation proved m Art. 939 (3) a total amount greater than the debit balance of the current account after contra transfer, his right to a dividend in the bankruptcy of the remitter being thereby as of right reduced.
Where the status of, the account is such that on the date of bankruptcy 1ibere is already a debit balance to the remitter before contra transfer of the instruments, the receiver may not take by way of accumulation a total amount greater than the sum contra transferred together with the dividend calculated on the debit balance of the account before contra transfer, his right a dividend in the bankruptcy of the remitter being thereby as of right reduced.
Discount is an agreement whereby a banker undertakes to pay in advance to the holder the value of commercial instruments or other negotiable securities having a definite time of payment, which, the holder assigns to the banker subject to repayment of their value if not paid by, the person principally liable.
This transaction gives to, the banker the right to charge interest and further an endorsing or other commission.
A special a agreement may provide for a fixed discount.
Interest shall be calculated on the basis of the time remaining until maturity of the instruments, or for a shorter period in the case of so-called pawning transactions or others under which there is reimbursement before maturity by the beneficiary under the discount.
Commission shall be calculated on the basis of the value of the instruments.
A minimum amount of interest and of commission may be fixed.
The beneficiary under a discount shall reimburse to the banker the nominal value of unpaid instruments or securities.
Instruments accepted for discount for a partial amount only shall be reimbursed up to that amount.
The banker may, with regard to the principal debtors under an instrument, the beneficiary under the discount and other persons jointly liable, exercise all the rights arising out of the instruments discounted by him.
The banker has in addition, as regards the beneficiary under the discount, a separate right to reimbursement of sums placed at, the disposal of the beneficiary, together with interest and commission. This right may be exercised up to the amount of the unpaid instruments, irrespective of the reasons for non-payment, and, in the case of a current account between the parties, in accordance with the provisions of Art. 938.940.
An open credit has as its object to place directly or indirectly at the disposal of the beneficiary means of payment upto a certain sum of money.
An open credit may be granted for a limited or unlimited period. An unlimited credit may be cancelled at any time by the banker.
An advance on securities shall be in writing or it shall be null and void.
the designation of the securities deposited; and
the name and domicile of the owner or other beneficiary under the credit; and
the amount of and conditions under which the credit is graded.
Transferable securities may be pledged of any obligation even where, in the amount due is not specified.
The provisions of sub-art. (1) shall apply to a guarantee of obligations which are only contingent at the time of setting up of the pledge.
A guaranteed creditor who already holds the securities involved in some other manner shall be deemed to’ be put in possession as pledgee from the date of the contract.
Where the securities pledged are held by a third party already in possession in some other manner; the guaranteed creditor shall be deemed to be in possession from the time when the third party possessor has placed the said securities in a special account which he shall open on first call.
In the case of securities in respect of which there is a certificate in a specific name constituting an entry in the register of the company issuing the securities, the guaranteed creditor shall be deemed to be in possesion from the time when the transfer by way of guarantee has been entered.
A documentary credit is a credit opened by a bank providing for payment against presentation of specified documents to the opening bank or to its agent. Goods represented by such documents maybe held and disposed of by the bank in accordance with the terms agreed between the bank and its principal.
A documentary credit is independent of any contract of ale on which it may be based and to which a hank is not a party.
Such undertaking can neither be modified nor cancelled without the agreement of all persons concerned.