SOURCES OF COMMERCIAL LAW
Sources of commercial law
LAW: The law applicable to credit instruments is the LGTOC but it can also be applicable other commercial regulations to fill gaps such as the Commercial Code, specialized commercial laws and the
Civil Federal Code. All commercial regulations are federal.
JURISPRUDENCE: is used to fill gaps or to interpret the law in judicial actions regarding the non-payment of credit instruments.
CUSTOM: Usages and customs can be used in cases related to banking as long as they are recognized and accepted by the law, or by jurisprudence.
ESSENTIAL ELEMENTS OF CREDIT INSTRUMENTS
Subscription of an instrument and legal capacity of the parties
A holder is the person in possession if the instrument is payable to bearer or, in the case of an instrument payable to an identified person, if the identified person is in possession.
The definition holds dual requirements:
✓to be a holder a person must be in possession of an instrument and
✓the instrument essentially must run to that person.
The determination of whether an instrument runs to a particular person depends on whether the instrument is characterized as order paper or bearer paper. This depends on the form of the instrument as it was originally prepared or according to the effect following an endorsement.
Legal capacity of the parties
Every person capable of contracting may bind himself to be bound by the making, drawing, acceptance, endorsement, delivery and negotiation of a promissory note, a bill of exchange or check. Parties incompetent include minors, persons of unsound mind and insolvents.
A company can make credit instruments and be bounded by them through the representative having powers conferred by the articles of association.
An agent may negotiate credit instruments on behalf of the principal, prior authorization to that effect; the agent has to be a competent person too. He acts on behalf of the principal and cannot exceed his authority.
Credit instruments are consider movable goods and contain a right and an obligation in themselves. They are born by the free will of somebody, and automatically turn into a value; an obligation is created and it is govern by the law.