Law relating to negotiable Instrument

7/30/2019 Law relating to negotiable Instrument

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Definition of Negotiable Instruments:A negotiable instrument is a document guaranteeing the payment of a

specific amount of money, either on demand, or at a set time. Negotiable

instruments are often defined in legislation. For example, according tothe Section 13 of the Negotiable Instruments Act, 1881 in India, a

negotiable instrument is a promissory note, bill of exchange or cheque

payable either to order or to bearer. Cheque also includes demand draft

[Section 85A].

Negotiable means transferable by delivery, and Instrument means

a written document by which a right is created in favour of some

person.According to the section 13(1) of the Negotiable Instruments act of

1881,

A Negotiable instrument means a promissory note, Bill of exchange

or cheque payable either to order or to the bearer.

According to Section 13 (a) of the Act, Negotiable instrument

means a promissory note, bill of exchange or cheque payable either to

order or to bearer, whether the word order or bearer appear on the

instrument or not.

In the words of Justice, Willis, A negotiable instrument is one, the

property in which is acquired by anyone who takes it bonafide and for

value notwithstanding any defects of the title in the person from whom

he took it.

Types of Negotiable Instruments:

Promissory Note: A promissory note is an instrument in writingcontaining an unconditional undertaking signed by the maker to pay a

certain sum of money only to a certain person or the bearer of the

instrument.
http://en.wikipedia.org/wiki/Documenthttp://en.wikipedia.org/wiki/Promissory_notehttp://en.wikipedia.org/wiki/Negotiable_instrument#Bill_of_exchangehttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Negotiable_instrument#Bill_of_exchangehttp://en.wikipedia.org/wiki/Promissory_notehttp://en.wikipedia.org/wiki/Document


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Bill of Exchange: A bill of exchange is an instrument in writingcontaining an unconditional order, signed by the maker, directing a

certain person to pay another person a certain sum of money.

Cheque: A cheque is a bill of exchange on a specified banker andnot expressed to be payable otherwise than on demand.Hundis: Negotiable instruments written in any vernacular languageaccording to the Indian Mercantile common law are called as Hundis.

Dishonour of Negotiable Instruments:Dishonour by Non AcceptanceBill of Exchange

Dishonour by Non PaymentPromissory NoteBill of Exchange Cheque

Dishonour by Non Acceptance:

When a Drawee / Drawees (not being partners) make default inAcceptance

The Presentment for Acceptance is excused and the Bill remainsunaccepted

Drawee is incompetentDrawee makes the Acceptance qualifiedDrawee is fictitious person or abscondingIMP: In case ofthe note where drawee in case of need is named in a

bill of exchange,the bill is not dishonoured until it has been

dishonoured by such drawee (Sec 115)


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Dishonour by Non Acceptance:

A promissory note, bill of exchange or cheque is said to bedishonoured by non payment when the maker of the note, acceptor ofthe bill or the frawee of the cheque makes default in payment upon

being duly required to pay the same(Sec 92)

A promissory note, bill of exchange or cheque is said to bedishonoured by non payment when payment is excused by the maker

of the note or the acceptor of the bill and the note remains unpaid at

or after.

Acceptance:

FavoritesShow Examples:

1. Agreements: Granting of an unqualified consent (whether express orimplied) to the terms of a contract by the involved parties. When an

offer is received, it is either accepted or countered (with a counter offer).

A counter offer obligates the other party to accept it or respond with its

own counter offer. Accepting an offer (or a counter offer) creates a

binding contract. Sometimes, the term 'subject to contract' is used in

offers or acceptances to indicate that the parties intend to be bound only

under a formal contract when it is prepared and signed (executed).

2. Commerce: Buyer's approval of the goods supplied at their invoiced

price, signified by the act of taking delivery, and/or use, of the goods

without protest.
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3. Documentary credit: Creation of an unconditional and binding

promise to pay a bill of exchange, by signing it under the word

'accepted.' Generally, anyone who signs a bill of exchange on which the

accepting firm's name is not mentioned in legible characters, is held

personally liable for the amount of the bill if it remains unpaid. See alsogeneral acceptance and qualified acceptance.

4. Legal: Execution of an official document by an authorized agent or

representative of the government.

5. Shipping: Acknowledgment by a consignee of the receipt of a

consignment, thus terminating the contract of carriage.
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