Shipping, Insurance, Letters of Credit, Promissory Notes

1
Shipping, Insurance, Letters of Credit,
Promissory Notes
2
Delivery of Goods

• 4 Stages
• Contract
• Manufacture
• Delivery to buyer
• Usually by Ship
• Air Freight
• Land (Rail or Truck)
• Focus on Shipping
• Payment

3
Delivery

• Arrive safe and on time
• Who is responsible for loss or damage during
  shipment?
• Who is responsible for late delivery?

4
Insurance

• Someone else pays for loss or damage in exchange
  for a payment
• Not required, but usually done

5
Payment

• Once delivered, you must pay
• Seller wants to be certain of payment
• Letter of Credit/Promissory Notes

6
Federal Express Label
7
Shipping

• When does delivery occur?
• When does ownership (title) pass?
• Who bears risk of loss in transit?
• Who pays for cost of shipping?
• Who is responsible for compliance with Government
  Regulations, both export and import?
• 3 Parties
• Seller
• Buyer
• Shipper (Carrier)

8
Free On-Board (FOB)

• Primarily for sea shipment
• Delivery occurs when goods are over the rail of
  the ship
• Seller responsible for all export regulations
• Buyer responsible for all import regulations
• Buyer pays for shipping
• Buyer has risk of loss during shipping
• Can purchase insurance

9
Cost-Insurance-Freight (CIF)

• Again most common for sea shipment
• More common than FOB
• Delivery occurs when goods are over the rail
• Seller pays for shipping
• Seller provides for insurance to some level set
  by Contract
• Buyer can purchase additional insurance

10
2 Types of Carrier

• Common Carrier company in the business of
  transporting goods is hired by whomever has goods
  to ship
• Private Carrier hired by an entity (usually
  seller) to deliver its goods
• e.g. charters a ship to deliver goods
• Carrier includes all means of delivery
• Truck to port
• Ship across ocean
• Train from port to distribution center
• Truck to purchaser

11
Liability of Carrier

• Look at FedEx label
• Limit of liability
• Regardless of value
• Old newspaper
• Diamond rings
• Contract with a value of millions
• Rare painting
• Is that fair?
• Money received for shipping is compared to value
  of goods

12
Bill of Lading (B of L)

• Definition
• Document of title acknowledging receipt of goods
  by a carrier or by the shippers agent
• Document that indicates the receipt of goods for
  shipment and that is issued by a person engaged
  in the business of transporting or forwarding
  goods
• Document which puts into effect the entire
  process
• Contains Terms of Contract

13
Bill of Lading

• 4 Purposes
• Contract between shipper and carrier for shipping
  goods
• Proof that goods have been provided to shipper
• Indicates who has title seller or buyer
• When it is negotiable (can be transferred)
  allowing title to goods to be transferred

14
Bill of Lading

• How it Works
• Carrier delivers to Seller
• Seller sends to Buyer
• Carrier releases to whomever presents B of L
• Original Buyer can sell to someone else or give
  to Bank

15
Alternatives to Bills of Lading

• Cargo Receipt simple receipt
• Waybill receipt which requires delivery to a
  particular person
• Straight Bill of Lading similar to waybill

16
Responsibility of Carrier

• Defined by Hague-Visby Rules
• Treaty first entered into in 1924
• Amended in 1968
• Relieve Carriers of most liability for damage to
  goods

17
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Move liability to Carrier
• Resisted by Nations with large shipping business,
  e.g. England, Holland, U.S.

18
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Scope of Application Art. 2
• the port of loading as provided for in the
  contract of carriage by sea is located in a
  Contracting State, or
• the port of discharge as provided for in the
  contract of carriage by sea is located in a
  Contracting State, or
• one of the optional ports of discharge provided
  for in the contract of carriage by sea is the
  actual port of discharge and such port is located
  in a Contracting State, or
• the bill of lading or other document evidencing
  the contract of carriage by sea is issued in a
  Contracting State, or

19
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Scope of Application Art. 2
• the bill of lading or other document evidencing
  the contract of carriage by sea provides that the
  provisions of this Convention or the legislation
  of any State giving effect to them are to govern
  the contract.

20
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Time of Responsibilities Art. 4
• The responsibility of the carrier for the goods
  under this Convention covers the period during
  which the carrier is in charge of the goods at
  the port of loading, during the carriage and at
  the port of discharge.

21
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Basis of Liability Art. 5
• The carrier is liable for loss resulting from
  loss of or damage to the goods, as well as from
  delay in delivery, if the occurrence which caused
  the loss, damage or delay took place while the
  goods were in his charge as defined in article 4,
  unless the carrier proves that he, his servants
  or agents took all measures that could reasonably
  be required to avoid the occurrence and its
  consequences.

22
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Basis of Liability Art. 5
• The person entitled to make a claim for the loss
  of goods may treat the goods as lost if they have
  not been delivered as required by article 4
  within 60 consecutive days following the expiry
  of the time for delivery according to paragraph 2
  of this article.

23
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Basis of Liability Art. 5
• The carrier is not liable, except in general
  average, where loss, damage or delay in delivery
  resulted from measure to save life or from
  reasonable measures to save property at sea.

24
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Limits of Liability Art. 8
• Less than value of goods
• The liability of the carrier for loss resulting
  from loss of or damage to goods according to the
  provisions of article 5 is limited to an amount
  equivalent to 835 units of account per package or
  other shipping unit or 2.5 units of account per
  kilogram of gross weight of the goods lost or
  damaged, whichever is the higher
• The liability of the carrier for delay in
  delivery according to the provisions of article 5
  is limited to an amount equivalent to two and a
  half times the freight payable for the goods
  delayed, but not exceeding the total freight
  payable under the contract of carriage of goods
  by sea.

25
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Limits of Liability Art. 8
• Less than value of goods
• In no case shall the aggregate liability of the
  carrier, under both subparagraphs (a) and (b) of
  this paragraph, exceed the limitation which would
  be established under subparagraph (a) of this
  paragraph for total loss of the goods with
  respect to which such liability was incurred.

26
U.N. Convention on Carriage of Goods by Sea Act
of 1978 (Hamburg Rules)

• Contractual Stipulations Art. 23
• Any stipulation in a contract of carriage by sea,
  in a bill of lading, or in any other document
  evidencing the contract of carriage by sea is
  null and void to the extent that it derogates,
  directly or indirectly, from the provisions of
  this Convention. The nullity of such a
  stipulation does not affect the validity of the
  other provisions of the contract or document of
  which it forms a part. A clause assigning
  benefit of insurance of goods in favour of the
  carrier, or any similar clause, is null and void.

27
Insurance - General

• A contract that is purchased by someone with an
  insurable interest whereby insurer agrees to
  indemnify (pay the value of) for a loss
  incurrence
• Fire insurance on house
• Life insurance
• Damage to automobile

28
Insurance for Goods in Transit

• Insurer pays to person who has insurable
  interest for losses due to certain events

29
Insurable Interest

• Buyer
• Seller
• Who has title

30
Types of Insurance

• Voyage
• Stated period of time
• Value stated
• Actual value

31
Types of Risks

• All risks
• Defined risks, e.g. Perils at Sea

32
Documentary Credits

• ICC Uniform Customs Practice for Documentary
  Credits (UCP500)
• Successor to UCP400
• Adopted by UNCITRAL

33
ICC Uniform Customs and Practice for Documentary
Credits

• Meaning of Credit Art. 2
• For the purposes of these articles, the
  expressions documentary credit(s) and standby
  letter(s) of credit (hereinafter referred to as
  credit(s)), mean any arrangement, however named
  or described, whereby a bank (the issuing bank)
  acting at the request and on the instructions of
  a customer (the applicant for the credit),

34
ICC Uniform Customs and Practice for Documentary
Credits

• Meaning of Credit Art. 2
• Is to make a payment to or to the order of a
  third party (the Beneficiary), or is to accept
  and pay bills of exchange (Draft(s)) drawn by the
  Beneficiary,
• Or
• Authorises another bank to effect such payment,
  or to accept and pay such bills of exchange
  (Draft(s)),
• Or
• Authorises another bank to negotiate,

35
ICC Uniform Customs and Practice for Documentary
Credits

• Meaning of Credit Art. 2
• Against stipulated document(s), provided that the
  terms and conditions of the Credit are compiled
  with.
• For the purposes of these Articles, branches of a
  bank in different countries are considered
  another bank.

36
ICC Uniform Customs and Practice for Documentary
Credits

• Credits v. Contracts Art. 3
• Credits, by their nature, are separate
  transactions from the sales or other contract(s)
  on which they may be based and banks are in no
  way concerned with or bound by such contract(s),
  even if any reference whatsoever to such
  contract(s) is included in the Credit.
  Consequently, the undertaking of a bank to pay,
  accept and pay Draft(s) or negotiate and/or to
  fulfill any other obligation under the Credit, is
  not subject to claims or defences by the
  Applicant resulting from his relationship with
  the issuing Bank or the Beneficiary.

37
ICC Uniform Customs and Practice for Documentary
Credits

• Credits v. Contracts Art. 3
• A Beneficiary can in no case avail himself of the
  contractual relationships existing between the
  banks or between the Applicant and the Issuing
  Bank.

38
ICC Uniform Customs and Practice for Documentary
Credits

• Documents v. Goods/Services/Performances Art. 4
• In Credit operations all parties concerned deal
  with documents, and not with goods, services
  and/or other performances to which the documents
  may relate.

39
ICC Uniform Customs and Practice for Documentary
Credits

• Liability of Issuing and Confirming Banks Art.
  9
• An irrevocable Credit constitutes a definite
  undertaking of the Issuing Bank, provided that
  the stipulated documents are presented to the
  Nominated Bank or to the Issuing Bank and that
  the terms and conditions of the Credit are
  compiled with
• If the Credit provides for sight payment to pay
  at sight
• If the Credit provides for deferred payment to
  pay on the maturity date(s) determinable in
  accordance with the stipulations of the Credit

40
ICC Uniform Customs and Practice for Documentary
Credits

• If the Credit provides for acceptance
• by the issuing bank to accept Draft(s) drawn by
  the Beneficiary on the Issuing Bank and pay them
  at maturity,
• or
• by another drawee bank to accept and pay at
  maturity Draft(s) drawn by the Beneficiary on the
  Issuing Bank in the event the drawee bank
  stipulated in the Credit does not accept Draft(s)
  drawn on it, or to pay Draft(s) accepted but not
  paid by such drawee bank at maturity

41
ICC Uniform Customs and Practice for Documentary
Credits

• If the Credit provides for negotiation to pay
  without recourse to drawers and/or bona fide
  holders, Draft(s) drawn by the Beneficiary and/or
  document(s) presented under the Credit. A Credit
  should not be issued available by Draft(s) on the
  Applicant. If the Credit nevertheless calls for
  Draft(s) on the Applicant, banks will consider
  such Draft(s) as an additional document(s).

42
ICC Uniform Customs and Practice for Documentary
Credits

• Liabilities and Responsibilities Art. 13
• Standard for Examination of Documents
• Banks must examine all documents stipulated in
  the Credit with reasonable care, to ascertain
  whether or not they appear, on their face, to be
  in compliance with the terms and conditions of
  the Credit. Compliance of the stipulated
  documents on their face with the terms and
  conditions of the Credit, shall be determined by
  international standard banking practice as
  reflected in these Articles. Documents which
  appear on their face to be inconsistent with one
  another will be considered as not appearing on
  their face to be in compliance with the terms and
  conditions of the Credit.

43
ICC Uniform Customs and Practice for Documentary
Credits

• Documents not stipulated in the Credit will not
  be examined by banks. If they receive such
  documents, they shall return them to the
  presenter or pass them on without responsibility.

44
ICC Uniform Customs and Practice for Documentary
Credits

• Liabilities and Responsibilities Art. 13
• Standard for Examination of Documents
• The issuing Bank, the Confirming Bank, if any, or
  a Nominated Bank acting on their behalf, shall
  each have a reasonable time, not to exceed seven
  banking days following the day of receipt of the
  documents, to examine the documents and determine
  whether to take up or refuse the documents and to
  inform the party from which it received the
  documents accordingly.

45
ICC Uniform Customs and Practice for Documentary
Credits

• Liabilities and Responsibilities Art. 13
• Standard for Examination of Documents
• If a Credit contains conditions without stating
  the document(s) to be presented in compliance
  therewith, banks will deem such conditions as not
  stated and will disregard them.

46
Types of Documents

• Art. 23 Bills of Lading
• Art. 24 Sea Waybill
• Art. 25 Charter Party Bill of Lading
• Art. 26 Multimodal Transport Document
• Art. 27 Air Transport Document
• Art. 28 Road, Rail or Inland Waterway Transport
  Documents
• Art. 29 Courier and Post Receipts
• Art. 30 Transport Document Issued by Freight
  Forwarder
• Art. 31 On Deck, Shippers Load and Count,
  Name of Consignor

47
Nature of Transaction
Sellers Bank
Buyers Bank
Buyer
Seller
Carrier

• Seller manufactures the Goods and delivers them
  to Carrier

48
Nature of Transaction
Sellers Bank
Buyers Bank
Buyer
Seller
Carrier

• Carrier loads the Goods and issues a Bill of
  Lading to Seller

49
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Buyer
Seller
Carrier

• Seller presents the Bill of Lading and other
  documents such as a Commercial Invoice and
  Certificate of Insurance to Sellers Bank, which
  acts as a Confirming Bank

50
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Buyer
Seller
Carrier

• Sellers Bank examines the Bill of Lading and
  other documents to determine whether they conform
  to the Letter of Credit Sellers bank decides
  that the documents are conforming and makes
  payment to Seller

51
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Issuing Bank
Buyer
Seller
Carrier

• Sellers Bank forwards the documents to Buyers
  Bank, which is the Issuing Bank

52
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Issuing Bank
Buyer
Seller
Carrier

• Buyers Bank examines the documents to determine
  whether they conform to the terms of the Letter
  of Credit Buyers Bank decides that the
  documents are conforming and reimburses Sellers
  Bank for payment under the Letter of Credit

53
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Issuing Bank
Buyer
Seller
Carrier

• Buyers Bank forwards the documents to Buyer

54
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Issuing Bank
Buyer
Seller
Carrier

• Buyers Bank debits Buyers account or buyer
  makes payment to Buyers Bank

55
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Issuing Bank
Buyer
Seller
Carrier

• Buyer presents Bill of Lading to Carrier

56
Nature of Transaction
Sellers Bank
Buyers Bank
Confirming Bank
Issuing Bank
Buyer
Seller
Carrier

• Carrier delivers Goods to Buyer

57
Non-Commercial Issues
58
Seller (Exporter)

• Export controls established by Government
• Types of goods or products
• Weapons
• High technology
• Countries
• U.S. prohibits exports to Cuba, North Korea

59
Buyer (Importer)

• Pay taxes (Customs)
• Nature of product
• WTO has attempted to equalize
• Country of origin
• Prohibited from some countries
• All
• Some
• Agricultural products
• Hazardous materials
• Products below fair value dumping

60
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Bill of Exchange Art. 3
• A bill of exchange is a written instrument which
• Contains an unconditional order whereby the
  drawer directs the drawee to pay a definite sum
  of money to the payee or to his order
• Is payable on demand or at a definite time
• Is dated
• Is signed by the drawer.

61
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Promissory Note Art. 3
• A promissory note is a written instrument which
• Contains an unconditional promise whereby the
  maker undertakes to pay a definite sum of money
  to the payee or to his order
• Is payable on demand or at a definite time
• Is dated
• Is signed by the maker.
• Examples

62
Promissory Note Payable to Order
______ Date City, State On
date, I promise to pay to the order of name,
the sum of _____ dollars (_______), with
interest at the rate of _____ percent (___) per
annum, at the bank, address. Value
received. Signature Maker
63
Promissory Note Payable to Bearer
______ Date City, State
Number days after date, I promise to pay to
Bearer, the sum of _____ dollars (_______), with
interest at _____ percent (___) per
annum. Signature Maker
64
U.N. Convention on International Bills of
Exchange International Promissory Notes

• What makes a promissory note international? Art.
  2
• An international promissory note is a promissory
  note which specifies at least two of the
  following places and indicates that any two so
  specified are situated in States
• the place where the note is made
• The place indicated next to the signature of the
  maker
• The place indicated next to the name of the
  payee
• the place of payment provided that the place of
  payment is specified on the note and that such
  place is situated in a Contracting State.

65
Benefits of a Promissory Note

• Same thing as money to person who holds it
• No reason not to pay if note complies with
  Convention
• Separate from underlying contract

66
Requirements

• Definite amount
• Payable on demand
• Properly endorsed

67
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Definite Amount Art. 7
• The sum payable by an instrument is deemed to be
  a definite sum although the instrument states
  that it is to be paid
• With interest
• By instalments at successive dates
• By instalments at successive dates with a
  stipulation in the instrument that upon default
  in payment of any instalment the unpaid balance
  becomes due
• According to a rate of exchange indicated in the
  instrument or to be determined as directed by the
  instrument or
• In a currency other than the currency in which
  the sum is expressed in the instrument.

68
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Definite Amount Art. 8
• If there is a discrepancy between the sum
  expressed in words and the sum expressed in
  figures, the sum payable by the instrument is the
  sum expressed in words.
• If the sum is expressed more than once in words,
  and there is a discrepancy, the sum payable is
  the smaller sum. The same rule applies if the
  sum is expressed more than once in figures only,
  and there is a discrepancy.
• If the sum is expressed in a currency having the
  same description as that of at least one other
  State than the State where payment is to be made,
  as indicated in the instrument, and the specified
  currency is not identified as the currency of any
  particular State, the currency is to be
  considered as the currency of the State where
  payment is to be made.

69
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Definite Amount Art. 8
• If an instrument states that the sum is to be
  paid with interest, without specifying the date
  from which interest is to run, interest runs from
  the date of the instrument.
• A stipulation stating that the sum is to be paid
  with interest is deemed not to have been written
  on the instrument unless it indicates the rate at
  which interest is to be paid.

70
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Definite Amount Art. 8
• A rate at which interest is to be paid may be
  expressed either as a definite rate or as a
  variable rate. For a variable rate to qualify
  for this purpose, it must vary in relation to one
  or more reference rates of interest in accordance
  with provisions stipulated in the instrument and
  each such reference rate must be published or
  otherwise available to the public and not be
  subject, directly or indirectly, to unilateral
  determination by a person who is named in the
  instrument at the time the bill is drawn or the
  note is made, unless the person is named only in
  the reference rate provisions,

71
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Definite Amount Art. 8
• If the rate at which interest is to be paid is
  expressed as a variable rate, it may be
  stipulated expressly in the instrument that such
  rate shall not be less than or exceed a specified
  rate of interest, or that the variations are
  otherwise limited.
• If a variable rate does not qualify under
  paragraph 6 of this article or for any reason it
  is not possible to determine the numerical value
  of the variable rate for any period, interest
  shall be payable for the relevant period at the
  rate calculated in accordance with paragraph 2 of
  article 70.

72
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Payable on Demand Art. 9
• An instrument is deemed to be payable on demand
• If it states that it is payable at sight or on
  demand or on presentment or if it contains words
  of similar import or
• If no time of payment is expressed.
• An instrument payable at a definite time which is
  accepted or endorsed or guaranteed after maturity
  is an instrument payable on demand as regards the
  acceptor, the endorser or the guarantor.

73
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Payable on Demand Art. 9
• An instrument is deemed to be payable at a
  definite time if it states that it is payable
• On a stated date or at a fixed period, after a
  stated date or at a fixed period after the date
  of the instrument
• At a fixed period after sight
• By instalments at successive dates or
• By instalments at successive dates with the
  stipulation in the instrument that upon default
  in payment of any instalment the unpaid balance
  becomes due.

74
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Payable on Demand Art. 9
• The time of payment of an instrument payable at a
  fixed period after date is determined by
  reference to the date of the instrument.
• The time of payment of a bill payable at a fixed
  period after sight is determined by the date of
  acceptance, or, if the bill is dishonoured by
  non-acceptance, by the date of protest or, if
  protest is dispensed with, by the date of
  dishonour.
• The time of payment of an instrument payable on
  demand is the date on which the instrument is
  presented for payment.

75
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Payable on Demand Art. 9
• The time of payment of a note payable at a fixed
  period after sight is determined by the date of
  the visa signed by the maker on the note or, if
  his visa is refused, by the date of presentment.
• If an instrument is drawn, or made, payable one
  or more months after a stated date or after the
  date of the instrument or after sight, the
  instrument is payable on the corresponding date
  of the month when payment must be made. If there
  is no corresponding date, the instrument is
  payable on the last day of the month.

76
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Endorsement Art. 14
• An endorsement must be written on the instrument
  or on a slip affixed thereto (allonge). It
  must be signed.
• An endorsement may be
• In blank, that is, by signature alone or by a
  signature accompanied by a statement to the
  effect that the instrument is payable to a person
  in possession of it
• Special, that is, by a signature accompanied by
  an indication of the person to whom the
  instrument is payable.
• A signature alone, other than that of the drawee,
  is an endorsement only if placed on the back of
  the instrument.

77
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Endorsement Art. 15
• A person is a holder if he is
• The payee in possession of the instrument or
• In possession of an instrument which has been
  endorsed to him, or on which the last endorsement
  is in blank, and on which there appears an
  uninterrupted series of endorsements, even if any
  endorsement was forged or was signed by an agent
  without authority.
• If an endorsement in blank is followed by another
  endorsement, the person who signed this last
  endorsement is deemed to be an endorsee by the
  endorsement in blank.

78
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Endorsement Art. 15
• A person is not prevented from being a holder by
  the fact that the instrument was obtained by him
  or any previous holder under circumstances ,
  including incapacity or fraud, duress or mistake
  of any kind, that would give rise to a claim to,
  or a defence against liability on, the instrument.

79
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Endorsement Art. 16
• The holder of an instrument on which the last
  endorsement is in blank may
• Further endorse it either by an endorsement in
  blank or by a special endorsement
• Convert the blank endorsement into a special
  endorsement by indicating in the endorsement that
  the instrument is payable to himself or to some
  other specified person or
• Transfer the instrument in accordance with
  subparagraph (b) of article 13.

80
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Endorsement Art. 18
• An endorsement must be unconditional.
• A conditional endorsement transfers the
  instrument whether or not the condition is
  fulfilled. The condition is ineffective as to
  those parties and transferees who are subsequent
  to the endorsee.

81
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Forgery Art. 25
• If an endorsement is forged, the person whose
  endorsement is forged, or a party who signed the
  instrument before the forgery, has the right to
  recover compensation for any damage that he may
  have suffered because of the forgery against
• The forger
• The person to whom the instrument was directly
  transferred by the forger
• A party or the drawee who paid the instrument to
  the forger directly or through one or more
  endorsees for collection.

82
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Forgery Art. 25
• However, an endorsee for collection is not liable
  under paragraph 1 of this article if he is
  without knowledge of the forgery
• At the time he pays the principal or advises him
  of the receipt of payment or
• At the time he receives payment, if this is
  later,
• unless his lack of knowledge is due to his
  failure to act in good faith or to exercise
  reasonable care.

83
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Forgery Art. 25
• Furthermore, a party or the drawee who pays an
  instrument is not liable under paragraph 1 of
  this article if, at the time he pays the
  instrument, he is without knowledge of the
  forgery, unless his lack of knowledge is due to
  his failure to act in good faith or to exercise
  reasonable care.
• Except as against the forger, the damages
  recoverable under paragraph 1 of this article may
  not exceed the amount referred to in article 70
  or article 71.

84
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Electronic Signature
• Electronic Commerce and Electronic Signature Act
• Art. 14
• Electronic signature shall not be denied legal
  effectiveness or admissibility as evidence solely
  on the grounds of its electronic form or not
  being based on a qualified certificate or a
  certificate issued by an accredited certification
  service provider or not being created by a secure
  signature creation device

85
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Electronic Signature
• Electronic Commerce and Electronic Signature Act
• Art. 15
• Advanced electronic signature, verified with
  qualified certificate, is equal to autographic
  signature in relation to data in electronic form,
  and has therefore equal legal effectiveness and
  admissibility as evidence.

86
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Electronic Signature
• Electronic Commerce and Electronic Signature Act
• Art. 16
• Persons, who store the documents, which are
  electronically signed with the use of signature
  creation data and signature creation devices,
  shall store complementary signature verification
  data and signature verification devices for as
  long as the documents are stored

87
U.N. Convention on International Bills of
Exchange International Promissory Notes

• Electronic Signature
• Electronic Commerce and Electronic Signature Act
• Art. 17
• The use of signature creation data or signature
  creation devices without the knowledge of the
  signatory or the holder of a certificate, which
  refers to these data or devices, is prohibited.