Abstract:This paper discusses the application of the principle of the non-cause of bills in modern economy and the complex relationship between it and credit and circulation. Through the detailed analysis of the definition and historical background of bill causelessness, the core role of the principle of bill causelessness in economic transactions is revealed. The principle of bill causeless not only simplifies the transaction process and improves the transaction efficiency, but also promotes the expansion of credit and the rapid circulation of funds, emphasizes the importance of the rational use of the principle of bill causeless in the modern financial system, and points out that this principle is essential to maintain the stability of the financial market and support economic growth. Combined with the principle of currency issuance, the theoretical analysis of the bill behavior of the ticker and the acceptor is put forward, and the application of the principle of restricting causelessness in the ticket-issuing link has the intrinsic value and practical significance of maintaining the financial order. Through the synthesis of various aspects of literature, this paper can provide readers with a deep understanding and insight into credit, circulation and the causelessness of bills.
Key words:Credit negotiable instruments Causeless monetary power
1. Introduction
In the framework of modern financial law, the principle of causality of bills is a crucial concept. This principle gives the holder of the note the right to demand payment based on what is written on the face of the note, without relying on or showing the underlying transaction behind the note. This mechanism significantly promotes the circulation and trading use of commercial paper, improves the efficiency of commodity transactions, and thus promotes the development of the overall economy. The establishment of the principle of the non-cause of bills reduces legal disputes in the process of bill circulation, improves the confidence of market participants in the payment of bills, and thus speeds up the circulation of funds in the economic system.
This paper will make a comprehensive discussion on the principle of no cause of bills, including its basic concept, legal basis and its historical development in modern financial law. We will also provide an in-depth analysis of the underlying drivers of the principle of causality of instruments, including how circulating credit and market trust work together to support the effective operation of this principle. In addition, this paper will innovatively explore the impact of this principle on the key participants in the bill relationship-the ticket-taker and the acceptor, in particular how to legally restrict the rights of these actors and their ticket-issuing behavior in order to maintain the health and stability of financial markets. Through a detailed analysis of the aforementioned aspects, this paper aims to help readers gain a deeper understanding of the principle of causelessness of bills and their role and limitations in the modern financial system.
1. An overview of the principle of the non-cause of bills.
The principle of the non-cause of bills occupies a central position in modern financial law. It gives the holder of the instrument the right to demand payment based on the instrument itself, rather than relying on the existence of the underlying transaction. This principle has played a vital role in simplifying the transaction process, improving efficiency and promoting the circulation of credit, and has had a profound impact on the healthy operation of the modern economic system.
Definition of (I) and Legal Basis
At the heart of the principle of causality of an instrument lies its legal status independent of the original transaction [note I]. This means that the holder of the note can demand payment without being subject to the transaction behind the note. This definition aims to address obstacles in the circulation of commercial paper in order to improve trade efficiency. Since then, this principle has gradually been integrated into the modern financial legal system and has become an important tool to support economic activities. It provides the necessary legal support for the bill market and ensures the smooth flow of financial transactions.
(II) historical background
The history of the causeless nature of bills dates back to medieval Europe. The merchants of the time developed this principle in order to solve the problems of payment and credit in the course of trade [note ii]. Over time, with the growth of business activities and the development of financial markets, this principle has been gradually incorporated into the legislative and judicial system to adapt to the changing business and financial environment, and has become an indispensable part of modern financial transaction and bill finance law.
The importance of (III) in the economic cycle
In the modern economy, the principle of bill causeless plays a key role in improving transaction efficiency, reducing transaction costs and promoting credit and financial flows. The principle of causality of bills provides greater security and certainty to holders of commercial paper, enabling them to rely more on bills as a tool for payment and financing [note iii]. This trust is based on a legally guaranteed bill payment commitment, which reduces the risk to the bearer and promotes broader market participation. In addition, the application of the principle of the non-cause of bills also promotes the legal and orderly expansion of credit and the flow of funds, providing more financing opportunities for enterprises and individuals, thus supporting the growth of the overall economy.
In short, the principle of the non-cause of bills is a key component of the modern financial legal system. It not only simplifies the transaction process of commercial paper, but also provides stability and predictability to the financial market. By providing legal protection for note holders, this principle enhances the confidence of market participants in the note as a payment and financing instrument, thus playing a vital role in the modern economy.
3. Logical Internal Cause of Establishing the Causelessness of Instruments
The establishment and maintenance of the causeless nature of instruments is not only the result of the mandatory and direct provisions of the law, but is also deeply rooted in the core concepts of circulation and credit. Circulation credit, that is, the mechanism based on mutual trust, which enables the free flow of funds and credit between different subjects, is the cornerstone of the efficient operation of the modern financial system. It can be said that the principle of the non-cause of the bill is based on the logic of enhancing credit and thus evolved, no cause is the phenomenon, but the cause is the essence.
(I) bill credit circulation mechanism
In the bill transaction, the circulation credit plays a vital role. The initial credit of the bill ensures that it can circulate freely in the market even if there is no direct trade background in the circulation link [note iv]. It can be seen that the bill is essentially the carrier of credit circulation mechanism, the existence of this credit not only accelerates the circulation speed of the bill, but also enhances the credit value of the bill as a medium of exchange. Therefore, the principle of bill causeless relies heavily on this trust-based circulation mechanism.
The mutual promotion of (II) credit and circulation.
There is a close link between the liquidity and creditworthiness of the instrument. As the number of times the instrument circulates in the market increases, the level of credit it implies increases accordingly [Note v]. From the point of view of the bill law, the more the number of bills in circulation, the more the endorser, the more the joint debtor of the bill, the more can play a role in the issuance and acceptance of the letter. This phenomenon not only reflects the increased trust of market participants in the instrument, but also reflects the robustness of the instrument as a financial instrument. The principle of no cause for bills plays a key role here, ensuring that bills maintain their value and effectiveness even after multiple transfers, thus supporting the stable operation of the entire financial system.
In addition, the application of the principle of no cause of bills also reflects the dual needs of the modern financial system for transaction efficiency and transaction security. The principle of no cause for bills not only simplifies the transfer and payment process of bills, reduces the time and cost of both parties to bill transactions in verifying the authenticity of background transactions, but also provides necessary legal protection for bill transactions [note vi]. These guarantees ensure that market participants can invest more confidently in note transactions without undue concern about the potential risk of fraud or the uncertainty of payment redemption.
In short, the complementarity between circulation and credit reciprocity and the principle of causality of bills provides a strong guarantee of stability and liquidity for the modern financial system.
4. Bill Causeless and Economic Development
The principle of non-cause of bills plays an extremely important role in modern economic system. This principle not only simplifies the process of commercial transactions, but also significantly improves the efficiency of transactions and provides strong support for the prosperity and development of the economy. Its application reduces the uncertainty in business activities and improves the security of transactions, thereby attracting more market participants and enhancing the vitality of the entire financial system.
(I) promotes transaction efficiency
By reducing disputes and uncertainty in transactions, the principle of non-causality of bills, under which payment of bills is no longer subject to the original transaction, means that the holder can obtain payment more quickly without being involved in the complex verification process of the underlying transaction. This simplified transaction process has largely accelerated the circulation of funds and promoted the efficiency of overall economic activity.
(II) facilitates corporate finance and capital flows
The principle of no cause of bills also plays a vital role in corporate financing and the circulation of funds. the application of the principle of no cause for bills enables enterprises to raise funds quickly by issuing commercial bills without having to wait for the long-term credit approval process [note vii]. This not only provides more flexible financing channels for enterprises, but also provides more liquidity for the entire market, thereby supporting economic growth. Of course, raising funds here refers to the ability to obtain alternative funds to pay, not the issuance of purely financed debt instruments.
(III) Promote the Healthy Development of Financial Market
The effective application of the principle of no cause of bills is also crucial to the healthy development of financial markets. The principle of causality of bills provides a safeguard mechanism to ensure that the payment of bills can be guaranteed even in the event of economic fluctuations or market uncertainty [Note VIII]. This stability is very important to maintain the confidence of investors and market participants, especially in times of economic turmoil. The application of the principle of the non-cause of bills helps to promote a virtuous circle of the economy, which not only promotes the rapid circulation of funds, but also improves the reliability and effectiveness of financial instruments. This effect is not limited to the financial sector, but also extends to the entire economic system. By improving transaction efficiency and reducing the cost of capital, the principle of bill causelessness stimulates more economic activities, thereby promoting overall economic growth and prosperity, and is a key factor in promoting sustained and healthy economic development.
5. The restriction of the bill without cause on the act of issuing the bill.
In the bill transaction relationship, the role of the drawer and the acceptor is very important. They are not only the creators of the credit of the note, but also the key link and the ultimate bottom line to maintain the credit of the payment of the note. The issuer is responsible for issuing the instrument, while the acceptor undertakes to pay the instrument, an arrangement that ensures the credit value of the instrument and facilitates its circulation in the financial markets. Of course, many times the role of the ticket-taker and the acceptor is combined into one.
(I) the basic legal liability of the drawer and the acceptor
The drawer and the acceptor have created the credit of the note, and they should have the obligation to make the cycle of the credit of the note form a closed loop, and have the obligation to prevent credit exposure and gap. Therefore, the drawer and the acceptor bear the legal responsibility to ensure that the bill can be paid at maturity. This obligation to pay is at the heart of the creditworthiness of the instrument and protects the interests of the bearer and the creditworthiness of the instrument [Note ix]. In law, if the drawer or acceptor fails to fulfill its obligation to pay, the holder may be held liable for the settlement of its bill debt in accordance with the law.
(II) to prevent the monetary alienation of instruments
Although the principle of the non-cause of the bill facilitates the circulation of the bill, it does not mean that the ticket-taker and the acceptor can issue or accept the bill without restriction, nor does it mean that the principle of the non-cause of the bill can be applied arbitrarily in the ticket-issuing process. Some scholars in financial and legal theory have argued that the issuance and acceptance of instruments must be based on actual underlying transactions [Note X]. This means that the notes should represent real economic activity, not just short notes issued to create credit. Such restrictions help prevent the indiscriminate issuance of bills and ensure the healthy development of the bill market.
The issuance of instruments without underlying transactions is essentially similar to the act of issuing currency, mainly because it involves the creation of credit that is not supported by real economic activity. The key here is to understand the nature of money and the credit mechanism represented by the instrument:：
Modern money is often unprepared, even unanchored, pure credit money. Credit money is a means of payment used for transactions and debt repayment. It is based on government credit and legal tender monetary policy, based on national credit and monetary public power to give circulation, based on the survival of the state to obtain a closed loop and cycle of credit cycle, no and no need to be directly linked to the exchange of specific goods or services.
Instruments are usually based on some underlying transaction (e. g., the purchase and sale of goods or the provision of services) and are often embodied in the right to pay a physical asset. In this regard, the Northern Song Dynasty, the compulsory exchange of gold and silver bills, and even bills of lading and warehouse receipts, can be counted as a broad bill. A financial instrument within the narrow bill law is a short-term credit instrument that allows the holder to demand the payment of a certain amount of money at a future point in time. However, financial instruments also need to be issued on the basis of underlying transactions or economic benefits (consideration), and financial instruments are short-term credit instruments similar to anchor currencies.
On the one hand, the generation of bills based on the consideration of real economic benefits will eventually be paid or filled in the consideration, rather than short bills. On the other hand, the issuance based on real basic transactions is the embodiment or conversion of the real economy and will not inflate the number of social economic transactions and the total amount of social credit. But when the act of issuing a bill is not supported by the underlying transaction, it means that it is not based on the exchange and value of the actual goods or services, but rather increases the total amount of social credit out of thin air. In this case, the issuance of the instrument is essentially a creation of credit rather than a reflection of real economic activity.
Issuing an instrument without an underlying transaction is like issuing a new credit currency. Because this instrument creates an unprepared or unanchored payment power, but is not backed by a corresponding good or service, it erodes the central bank's right to issue money, similar to the situation where the central bank issues money that does not directly correspond to specific economic output. This kind of behavior is not only the monetary alienation of bill behavior, but also the private alienation of monetary public power, which is likely to lead to credit expansion and may even lead to financial stability problems, especially if a large number of instruments without basic transactions are widely accepted and used.
Thus, in a sense, the issuance of instruments without underlying transactions is essentially similar to the issuance of currency. In recent years, enterprise groups, represented by certain real estate groups, have played the role of "secondary currency" in the real estate industry chain involving more than dozens of industries. When the real estate ebb and the real estate liquidity is not enough to support the "secondary currency" credit closed loop, or the "secondary currency" credit volume expands to burst, it will affect the entire real estate industry chain and even the health of the national economy and financial order.
The legal practice of (III) restricting the causality of bills.
Article 10 of the Bill Law stipulates that "the issuance, acquisition and transfer of bills shall follow the principle of good faith and have a real transaction relationship and a debt and debt relationship. In the acquisition of a bill, consideration must be paid, that is, the corresponding consideration recognized by the parties to the bill shall be paid." It seems that the principle of causality in the issuance, acquisition and transfer of bills is weakened, emphasizing the instinct of bills as a settlement tool to serve the circulation of the real economy. In addition, the Supreme People's Court seems to have amended this to a certain extent in judicial practice. Article 2 of the Provisions of the Supreme People's Court on the Trial of Bills Dispute Cases stipulates that "in accordance with the provisions of Article 10 of the Bills Law, if the debtor of the instrument (I. e., the drawer) files a lawsuit for the return of the instrument on the grounds that the underlying relationship at the time the instrument was not transferred was illegal, that the parties did not have a true transaction relationship and a debt and debt relationship, and that the holder paid the consideration but did not pay the consideration, the people's court shall accept it in accordance with the law." A specific judicial opinion is provided, which clearly defines the restriction on the causeless nature of the bill in the ticketing process. This provision requires that the act of issuing a ticket must be backed by a legitimate underlying transaction. If the initial act of ticketing is not based on a legitimate underlying transaction relationship and its consideration, the drawer has the right to request cancellation of the instrument to prevent improper financial conduct. These legal provisions help to ensure the fairness and impartiality of the bill market and prevent the use of bills for illegal purposes such as fraud and monetization to expand social credit.
6. Conclusion
After an in-depth discussion of the causelessness of credit, circulation and instruments, the following conclusions can be drawn:
The principle of bill causelessness plays a vital role in the modern economic system. By simplifying the business transaction process, it significantly improves transaction efficiency and injects stability and predictability into the financial market. This principle reduces the legal complexity of transactions and enhances the trust of market participants in financial instruments, thereby promoting the healthy development of the overall economy.
As the internal supporting factor of the principle of bill causelessness, the circulation credit allows the bill and its credit to flow freely among different economic subjects based on the trust mechanism. The existence of this mutually reinforcing circulation and credit not only strengthens the function of instruments as payment and financing instruments, but also promotes the efficient allocation of economic resources. The expansion and strengthening of circulating credit is the legal basis for the effective operation of the modern financial system.
The principle of the non-cause of the bill sets certain restrictions on the ticketing behavior of the ticketing and the acceptor. These restrictions ensure that the issuance of instruments is based on actual economic activity and prevent spamming and fraud. The responsibility of the drawer and the acceptor lies in the creation of real credit, and the corresponding legal constraints should ensure the legitimacy and validity of this credit.
In general, it is undeniable that the principle of non-causality of bills has significant financial credit stability and legal justice value in the circulation of bills. However, in the issue of the bill, we should limit, weaken or even exclude this principle.
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2023.11.16
