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2023-04-27

Payment and debtors in Germany

It is possible that in the dawn of history men lived in family groups, and that there was no such thing as commerce. Today, however, even the most backward peoples have some form of commerce, even if it only takes the form of barter.
From early times coined money came to be used as a medium of exchange, and the coinage circumvented the obvious defects of barter. Money itself, however, is not always a convenient medium; it is, for example, both difficult and dangerous to transport from place to place. This inconvenience affects large sums of money in the form of notes as much as it affects coined money. Hence, at least by the middle ages, the merchants of Europe had invented negotiable instruments as a substitute for money.
A negotiable instrument is a written document embodying a promise usually to pay money. Three requirements have to be satisfied before the courts will recognize an instrument as 'negotiable'. It must be freely transferable, like cash, by delivery so that it can be passed from hand to hand in such a way as to entitle the holder of it to enforce the original promise. Either it must have been made negotiable by statute, or it must be a document which is treated as negotiable by statute, or it must be a written contract which is treated as negotiable by commercial custom. It follows that there is no closed list of negotiable instruments, for German statute and custom may create appropriate new classes of documents from time to time. Custom, however, is never easy to prove, and it should not, therefore, be imagined that new classes of negotiable instruments are constantly being recognized in modern times.
Contracts
When an instrument has thus acquired 'negotiability' it will be treated as representing money, and it therefore acquires a basic characteristic of money. If I steal your bicycle and sell it to X it will normally remain yours and you can recover it, or the value of it, from X. If I steal your money and buy a bicycle with it from Y the money ceases to be yours from the moment of the sale. In other words, money is not subject to the rule 'no one can give a better title than he himself has'. The same rule applies to negotiable instruments. Provided that a client in Germany who acquires a negotiable instrument takes it in good faith, and provided that he can prove that value has been given for it, he obtains a good title to it, even though he acquired it from a thief. One of the outstanding features of negotiable instruments is that they may be sued upon by a lawyer who has not himself given consideration and by parties who have no privity of contract. And, like money, they may be 'negotiated', ie may pass from hand to hand.
Three of the more common classes of negotiable instruments must now be considered: bills of exchange, cheques and promissory notes.