Question

Write out a hypothetical scenario illustrating the creation and enforcement rights in securities and negotiable instruments. In general, try to answer each question in approximately 100-200 words. Please keep in mind that, if you use a lot of unnecessary words to identify only a handful of legal concepts, you will likely get a lower score.

Answer 1

Enforcement rights are all claims, demands, rights, interests, remedies, warranties, profit, royalties, income, maintenance, rights to indemnities, settle receive damages.

Securities: A security is a certificate or financial instrument that has monetary value and can be traded. for eg. equity securities, stocks, bonds, debentures etc.

Negotiable instruments: The word negotiable means 'transferable by delivery' and an instrument means written document by which a right is created for some person. It is a piece of paper that entitles a person to a certain sum of money and which is transferable from one to another. Eg. A promissory note, cheque and a bill of exchange.

Enforcement rights in securities and negotiable instruments:  

Suppose, A person who wants to take a loan against his securities then in this case security interest is an enforceable legal claim that has been pledged. The borrower provides the lender with a security interest in certain assets, which gives the lender the right to repossess all or part of the property if the borrower stops making loan payments. The common enforcement for security is a default in the repayment of loans. Lenders usually avoid accelerating loans upon the occurrence of nonpayment default.

But if a default happens, then security interest created by a pledge has contractual remedies where the lender may dispose of the assets without intervention of courts.

In case of negotiable instruments, if the maker or acceptor makes default in the payment. it can be defaulted by not making payments or by not accepting payments. For eg. if a promissory note, bill of exchange is said to be defaulted when the maker of the note, acceptor of the bill makes default in payments,

Very simple example, suppose person X does not have sufficient balance in his account but still he has draw cheque on the name person Y, if person deposited the same cheque in this case mr x is in default n bank will charge the fine from him.