7/28/2019 1st Part_ Negotiable Instrument

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ELEMENTS OF NEGOTIABLE INSTRUMENTS

a. An instrument must be in writingNo particular form of words is required for its validity. The only requirement is that itmust be in writing.

b. An instrument must contain a clear promise or orderAn instrument must contain a clear promise to pay in the case of a promissory note oran order to pay in the case of a bill of exchange or cheque.

It is not always necessary that the word promise should be used in the case of apromissory note. For example, I acknowledge myself to be indebted to B in Tk. 1000to be paid on demand for value received. This is a valid promissory note because thephrase payable on demand necessarily implies a promise to pay at once. But, I amliable to pay B Taka 1000 or I have taken from B Tk. 1000 and I am accountable tohim for the same with interests, these two are not promissory notes, as there is nopromise or undertaking to pay. These are mere acknowledgements of debts.

c. Promise or order, must be unconditionalThe promise or order to pay must not depend upon the happening of some uncertainevent. It must be payable absolutely. Although the uncertain event upon which thenote is payable happens, the happening of the event does not cure the defect. Therule is once void, always void. For instance, I promise to pay when able, or whenconvenient, or as soon as possible, or after Bs marriage with C, or on As deathprovided that he leaves me sufficient fund, etc. are conditional. But a promise to payafter a specified time or on the happening of an event which must happen althoughthe time of happening may be uncertain (Section 5, paragraph 2), is not conditional,e.g. I promise to pay B Tk. 1000 seven days after Cs death is not conditional; since C

is certain to die, though the exact time of his death is uncertain.

d. An instrument must be payable at a time which is certain to arriveIt does not mean that the instrument must specify a fixed date for payment. Theinstrument may be payable at a fixed future time or at a determinable future time.

e. An instrument must call for payment in the legal tender of Bangladesh.For instance, I promise to pay B US $ 300, is not a valid note under the NegotiableInstrument Act, 1881.

f. An instrument must call for payment for a certain sum of moneyThe amount must not be capable of contingent additions or subtractions, e.g. Ipromise to pay B Tk. 1000 and all other sums which shall become due to him or allfines according to the rules, is not a valid note, since the exact amount to be paid isuncertain.

g. The maker and the drawee must be certainIn the case of a note, the maker, and in the case of a bill or cheque, the drawee mustbe named or described with reasonable certainty. This enables the holder to know towhom he must go to obtain payment.

h. An instrument must contain the signature of maker or drawerIn the case of a note, the maker, and in the case of a bill or cheque, the drawer mustsign the instrument. If they are illiterate the thumb mark is required.

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4. Every transfer of instrument was made before maturity.5. The endorsements appearing upon an instrument were made in the order in which

they appear thereon.6. A lost or destroyed instrument was duly stamped and the stamp was duly

cancelled.7. The holder of an instrument is a holder in due course.

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