JITENDRA B L

8/9/2019 JITENDRA B L

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ASSIGNMENT

BUSSINESS LAW

SUBMITTED-TO SUBMITTED-BY

MS. PRIYANKA SHARMA JITENDRA KUMAR MAHESHWARI

DEPT.-M.B.A M.B.A IInd YEAR IIIrd SEM

BHAGWANT UNIVERSITY



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Q -1- Discuss in detail characteristics & Negotiable its kinds?

INTRODUCTION

The Negotiable Instruments Act was passed in 1881. Some provisions of the Act have become

redundant due to passage of time, change in methods of doing business and technology changes.

However, the basic principles of the Act are still valid and the Act has stood test of time. The Act

extends to the whole of India. There is no doubt that the Act is to regulate commercial

transactions and was drafted to suit requirements of business conditions then prevailing.

The instrument is mainly an instrument of credit readily convertible into money and easily

passable from one hand to another hand.

DEFINITION

³A transferable, signed document that promises to pay the bearer a sum of money at a future date

or on demand´ Examples include checks, bills of exchange, and promissory notes.

CHARACTERISTIC OF A NEGOTIABLE INSTRUMENT

A negotiable instrument has the following characteristics:

1} PROPERTY: The possessor of the instrument is the holder and owner thereof. A negotiable

instrument does not merely give possession of the instrument, but right to property. Whosever

gets possession of the instrument becomes its owner and is entitled to the sum mentioned therein

as the holder. It passes by mere delivery where instrument is payable to µbearer.¶2} DEFECTS

IN TITLE: The holder in good faith and for value called the µholder in due course¶ gets the

instrument free from all defects of any previous holder.

3} REMEDY: The holder can sue upon the negotiable instrument in his own name. All prior

parties are liable to him. A holder in due course can recover the full amount of the instrument.4}

RIGHT: The holder in due course is not affected by certain defenses which might be available

against previous holder, for example, fraud, to which he is not a party.

5} PAYABLE TO ORDER: All three negotiable instruments are payable to order which is

expressed to a particular person. An instrument which does not restrict its transferability

expressly is negotiable whether the word µorder¶ is mentioned or not. The word µorder¶ or

µbearer¶ is no longer necessary to render an instrument negotiable

It must be noted that all the three negotiable instrument is endorsed and is expressed to be



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payable to the order of a specified person, it is nevertheless payable to him or his order.

6} PAYABLE TO BEARER: the three negotiable instrument is expressed to be payable or on

which the only or last endorsement is an endorsement in blank. It specifies that the person in

possession of the bill is a bearer of the instrument which is so expressed payable to bearer.

7} PAYMENT: A negotiable instrument may be made payable to two or more payees, or it may

be payable in alternative to one or two payees.

8} CONSIDERATION: Consideration in the case of a negotiable instrument is presumed.

9} PRESUMPTIONS: Certain presumptions apply to all negotiable instruments.

TYPES OF NEGOTIABLE INSTRUMENTS:

A negotiable instrument regulates only three types, viz,

1} PROMISSORY NOTES.

2} BILLS OF EXCHANGE.

3} CHEQUES.

PROMISSORYNOTESDEFINATION

³A PROMISORY NOTE IS ANINSTRUMENT IN WRITING CONTAINING AN

UNCONDITIONAL UNDERTAKING SIGNED BY THE MAKER,TO PAY ACERTAIN SUM OF MONEY ONLY TO,OR TO THE ORDER OF A CERTAIN PERSON, OR

TO THE BEARER OF THE INSTRUMENT.THE PERSON WHO PROMISES TO PAY IS

CALLED THE ³MAKER´.THE PERSON WHO IS PROMISSED THE PAYMENT IS

CALLED THE ³PAYEE´ELEMENTS OF A PROMISSORY NOTEWRITING:

The promissory note must be in writing. Oral engagement or promise is excluded. No

particular form of words is necessary. It may be in any form but the words shall be visible.

Intention to make a note must be clear.

UNDERTAKING TO PAY: It is not necessary to use the word ³promise´ but the intentionmust clearly show an µunconditional undertaking¶ to pay the amount. The word µpromise¶ does

not mean that a document is not a promissory note, provided it fulfils the requirements of this

section and there is clear intention on the part of the parties to treat the document as a promissory

note.



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UNCONDITIONAL: It must contain definite and an unconditional undertaking to pay.

Promise to pay should be unconditional. A conditional instrument is invalid. It must be certain of

payment.

Unconditional promissory note:

a)A promise given for an executed consideration.

b)Any promise to pay an instrument on lapse of certain periods,after a specified event which is

certain to happen.

SIGNED: The instrument must be signed by the maker thereof. Person must sign with his

consent. It should not only be a physical act but also a mental act with an intention to sign.

CERTAIN PERSON: The maker and payee of the instrument must be a definite person. A note

may be made by several people to bind themselves jointly. A promissory note cannot be made by

two persons. Two different people should fill in the role of a maker and payee. The maker endorses the note. Payee is capable of being ascertained where he is wrongly described, he will

be a certain person.

E.g. - a promissory note payable to ³my only niece living in England´....is a valid promissory

note.

SPECIFIC SUM: The sum promise to be paid must be specific.

PROMISE TO PAY MONEY ONLY: The promise to pay must be money only. Promise to pay

anything other than legal tender, in full or in part, is not a promissory note.

STAMPING: Promissory notes are chargeable with stamp duty. It is advisable to cancel the

stamps with maker¶s signature or initials. An unstamped or improperly or insufficiently stamped

promissory note is not valid as evidence in court of law. No suit can be maintained upon an

unstamped or improperly stamped promissory note.

BILLS OF EXCHANGE

DEFINATION:

³A bill of exchange is an instrument in writing containing an unconditional order, signed by the

maker, directing a certain person to pay a certain sum of money only to, or to the order, a certain

person or to theBearer of the instrument.´

ESSENTIAL ELEMENTS OF A BILL OF EXCHANGE WRITING: -

A bill of exchange must be in writing and may be in any language, and in any form.

PARTIES: - There must be three parties to a bill of exchange, i.e., Drawer, Drawee and Payee.



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PAYEE:- Payee as the person named in the instrument, to whom or to whose order the money,

by the instrument directed to be paid.

ORDER TO PAY: - The bill of exchange must contain an order by the drawer to the drawee to

pay under any circumstances.

UNCONDITIONAL: - The o0rder in the bill must be unconditional, for example, payable

under all events and circumstances. Conditional bill is invalid.

SIGNED: - The bill must be signed by the drawer.

MONEY:- The order must be to pay money only

PAYEE MUST BE CERTAIN: - Bill may be made payable to two or more payees jointly or in

the alternatives.

CERTAIN SUM: - The sum payable may be µcertain¶ although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange.

STAMPING:-Bill of exchange is chargeable with stamp duty.

HUNDI:-

Bills of exchange drawn in vernacular language called µhundis¶ are covered by the Act. The word

'hundi', a generic term used to denote instruments of exchange in vernacular is derived from the

Sanskrit root 'hundi' meaning 'to collect' and well expresses the purpose to which instruments

were utilized in their origin. The Act does not affect any local usage relating to any instrument inan oriental language. In the absence of any custom or usage governing such instruments,

provisions of the Act will be extended to such other instruments, for example, hundis, bills of

landing, railway receipt, etc. The act does not affect the transfer of instruments under ordinary

law otherwise than by negotiation, for e.g. by assignment. A bonafide transferee of a negotiable

instrument for value, without notice of any defect acquires the instrument free of any defects. He

acquires a better title than that of the transferor irrespective of the transferor¶s title being

defective.

HOW PROMISSORY NOTE BECOMES A BILL OF EXCHANGE?

An instrument which is a promissory note may become a bill of exchange if acceptance is

endorsed thereon by a third party.

BILLS IN SETS

Bills of exchange may be drawn in parts. All the parts together make a set, but the whole set

constitutes only one bill. Bills are sometimes drawn in several parts. All the parts so drawn are



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referred as bill µdrawn in sets¶. The drawer of the µbills in sets¶ has to sign all the parts and

deliver all the parts but the acceptance should be written only on one part. If the drawee accepts

more than one part and if such separate accepted parts get into the hands of different holders in

due course, he and the subsequent endorsers of each part are liable on every such part as if it

were a separate bill.

CHEQUE

A Cheque is a bill of exchange drawn on a specified banker and not expressed to be payable

otherwise then on demand. A cheque is drawn on a banker only while a bill of exchange can be

drawn on any one. A cheque is an unconditional order on the specified banker to pay on demand,

a certain sum of money to the bearer of the cheque or to his order. A bill of exchange is wider

than a cheque.A cheque is not valid because it is post-dated. A cheque must be dated. Unlike a

promissory note and a bill of exchange, cheque may be drawn payable to bearer on demand.

Cheque crossed generally Where a cheque bears across its face an addition of the words "and

company" or any abbreviation thereof, between two parallel transverse lines, or of two parallel

transverse lines, simply, either with or without the words "not negotiable", that addition shall be

deemed a crossing, and the cheque shall be deemed to be crossed generally

Cheque crossed specially Where a cheque bears across its face an addition of the name of a

banker, either with or without the words "not negotiable", that addition shall be deemed a

crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that

banker.

Crossing after issue Where a cheque is uncrossed, the holder may cross it generally or specially.

Where a cheque is crossed generally, the holder may cross it specially.

Where a cheque is crossed generally or specially, the holder may add the words "not negotiable".

Where a cheque is crossed specially, the banker to whom it is crossed may again cross it

specially to another banker, his agent, for collection.Payment of cheque crossed generally

Where a cheque is crossed generally, the banker on whom it is drawn shall not pay it otherwise

than to the banker Payment of cheque crossed specially

Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise

than to the banker to whom it is crossed or his agent for collection

Payment of cheque crossed specially more than once Where a cheque is crossed specially to

more than one banker, except when crossed to an agent for the purpose of collection, the banker

on whom it is drawn shall refuse payment thereof. Payment in due course of crossed cheque

Where the banker on whom a crossed cheque is drawn has paid the same in due course, the

banker paying the cheque, and (in case such cheque has come to the hands of the payee) the

drawer thereof, shall respectively be entitled to the same rights, and be placed in the same

position in all respects, as they would respectively be entitled to and placed in if the amount of

the cheque had been paid to and received by the true owner thereof. Payment of crossed cheque

out of due course Any banker paying a cheque crossed generally otherwise than to a banker, or a

cheque crossed specially otherwise than to the banker to whom the same is crossed, or his agent



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reasonable and necessary expenses incurred in the performance of theServices; provided, however, that all such expenses shall be subject toCompany's prior approval. Air travel shall be at coach fares and lodgingshall be at moderately priced hotels, taking advantage of availablecorporate discounts.

D. Independent Contractor acknowledges and agrees that, except as provided in this Section 2, it shall not be entitled to, and the Companyshall not be obligated to pay, any monies or other compensation for theServices provided and rights granted under this Agreement.

3: ASSURANCE OF SERVICES

A. Independent Contractor will assure that the following individuals (the "KeyEmployees") will be available to perform, and will perform, the Serviceshereunder until they are completed

.

4: INDEPENDENT CONTRACTOR RELATIONSHIP

A. The Independent Contractor agrees to perform the Services hereunder solely as an Independent Contractor. The parties to this Agreementrecognize that this Agreement does not create any actual or apparentagency, partnership, franchise, or relationship of employer andemployee between the parties. The Independent Contractor is notauthorized to enter into or commit the Company to any agreements, andthe Independent Contractor shall not represent itself as the agent or legalrepresentative of the Company.

5: PROPRIETARY RIGHTS

A. The Independent Contractor acknowledges that it has no right to or interest in its work or product resulting from the Services performedhereunder, or any of the documents, reports or other materials created bythe Independent Contractor in connection with such Services, nor anyright to or interest in any copyright therein. The Independent Contractor acknowledges that the Services and the products thereof (hereinafter referred to as the "Materials") have been specially commissioned or ordered by the Company as "works made-for-hire" as that term is usedin the Copyright Law of the United States, and that the Company is

therefore to be deemed the author of and is the owner of all copyrightsin and to such Materials.

.

6: CONFIDENTIALITY

A. In connection with the performance of Services hereunder, theIndependent Contractor may be exposed to confidential and proprietaryinformation of the Company, whether or not so identified (including



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without limitation this Agreement). All such confidential and proprietary information shall be subject to the terms and conditions of the Non-Disclosure Agreement, as annexed in Exhibit B.

7: WARRANTIES AND INDEMNIFICATION The Independent Contractor represents and warrants that:

i) The Services shall be performed in accordance with, and shall notviolate, applicable laws, rules or regulations, and standards prevailing inthe industry and the Independent Contractor shall obtain all permits or permissions required to comply with such laws, rules or regulations;

ii) The Materials shall be original, clear, and presentable in accordancewith generally applicable standards in the industry;

iii) The Materials will not contain libelous, injurious, or unlawfulmaterial and will not violate or in any way infringe upon the personal or proprietary rights of third parties, including property, contractual,employment, trade secrets, proprietary information, and non-disclosurerights, or any trademark, copyright, or patent, nor will they contain anyformat, instruction, or information that is inaccurate or injurious to any person, computer system, or machine;

vi) The Independent Contractor has full power and authority to enter into and perform its obligations under this Agreement; this Agreement isa legal, valid, and binding obligation of Independent Contractor,

enforceable against it in accordance with its terms (except as may belimited by bankruptcy, insolvency, moratorium, or similar laws affectingcreditors' rights generally and equitable remedies); entering into thisAgreement will not violate the Charter or By-laws of IndependentContractor or any material contract to which it is a party;

v) The Independent Contractor will perform the Services in accordancewith the specifications established by the Company.

8: TERM AND TERMINATION

The term of this Agreement shall commence on the date hereof andshall continue until the Independent Contractor satisfactorily completes performance of the Services (hereinafter the "Term").

9: DAMAGES AND REMEDIES

In the event of termination of this Agreement by the Company pursuant



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to Section 8.B (i), the Company shall have all remedies available to it atlaw and in equity. Any and all Materials prepared for and/or delivered tothe Company prior to termination shall remain the property of theCompany.

voidable contract . Independent Contractor. Subject to the terms and conditions of thisAgreement, the Company hereby engages the Contractor as an independent contractor to performthe services set forth herein, and the Contractor hereby accepts such engagement.

Voidable

In law, a transaction or action which is voidable is valid, but may be annulled by one of the parties to the transaction. Voidable is usually used in distinction to void ab initio (or void fromthe outset) and unenforceable.

The act of invalidating the contract by the party exercising its rights to anul the voidable contractis usually referred to either as voiding the contract (in the United States and Canada) or avoiding the contract (in the United Kingdom, Australia and other common law countries).

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Voidable. That which may be avoided, or declared void; not absolutely void, or void in

itself. It imports a valid act which may be avoided rather than an invalid act which may

be ratified. U nited States v Price, D.C. Iowa, 514 F.Supp. 477,480 ´

Generally speaking, one party will have the right to elect whether to annul the transaction or to

affirm it. The avoiding of a voidable transaction amounts to the rescinding it, or exercising a power of rescission, and as such is subject to the general law in that regard.

The right to rescind can be lost. In common law there are generally said to be four "bars" torescission, any one of which will cause the agreement to no longer be considered voidable.

1. delay2. affirmation (or ratification)3. restitutio in integrum being impossible4. third party rights

Although the law varies from country to country, most disputes relating to whether a transactionis void or voidable turn on the ability to transfer title to goods. In many jurisdictions, if atransaction is valid, but voidable, title to good still passes under the transaction, and the recipientmay sell them with good title. If the transaction is void, no title passes, and the original seller canreclaim the goods.



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Independent Contract This Agreement shall not render the Contractor an employee, partner,

agent of, or joint venturer with the Company for any purpose. The Contractor is and will remain

an independent contractor in [his or her] relationship to the Company. The Company shall not be

responsible for withholding taxes with respect to the Contractor¶s compensation hereunder. The

Contractor shall have no claim against the Company hereunder or otherwise for vacation pay,

sick leave, retirement benefits, social security, worker¶s compensation, health or disability

benefits, unemployment insurance benefits, or employee benefits of any kind.

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