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2) Holder‟s title free from all defects: The holder in due course (one
who acquires the instrument in good faith and for consideration) gets
it free from all defects.
CONTD -
Sec.4
“ A promissory note is an instrument in writing
containing an unconditional undertaking signed by
the maker to pay a certain sum of money only to or
to the order of a certain person or to the bearer of
the instrument”.
.
PARTIES
1. It must be in writing .
2. It must contain a promise or undertaking to pay a definite
sum of money.
3. The promise to pay must be unconditional.
4. It must be signed by the maker.
5. The payee must be identified & must be certain.
6. The sum payable must be certain.
7. The amount payable must be in legal tender in money of
India.
8. Other formalities – like date, place ,& stamp must be
mentioned.
EXAMPLE
Sec.5 :
“A 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 of a
certain person or to the bearer of the instrument.”
PARTIES
1. It must be in writing.
2. It must contain an order to pay a definite sum of money.
3. The order to pay must be unconditional.
4. It must be signed by the drawer (who draw money).
5. The drawer, the drawee &the payee must be identified &
must be certain.
6. The sum payable must be certain.
7. The bill must contain an order to pay the money in legal
tender in India.
8. It must contain the formalities like date, place & stamp
etc.
CHEQUE
Sec.6 :
“ A cheque is a bill of exchange drawn on a specified
banker & not expense to be payable on a specified
banker & not expense to be payable otherwise than on
demand & it includes the electronic image of a
truncated cheque & a cheque in the electronic form.
FORMAT OF CHEQUE
No.……..
Date………..2010
Pay…………………………………………………………or bearer
the sum of Rs…………………………………
Rs…………………
A/c No LF No Sd/-
PUNJAB NATIONAL BANK
Subzi Mandi,Delhi -110007
“5777100” 111013035”
PARTIES
DRAWER: The person who makes a cheque is called Drawer.
DRAWEE: The person who is directed to pay is called Drawee.
PAYEE: The person to whom the payment is to be made.
ESSENTIAL FEATURES OF CHEQUE:
Thus, mere writing words „Not negotiable‟ does not mean that the
cheque is not transferable. It is still transferable, but the transferee
cannot get title better than what transferor had.
HOLDER
Sec.8
The Holder of a Promissory note, B.O.E or CHEQUE
means any person entitled in his own name to the
possession thereof, and to receive or recover the
amount due thereon from the parties thereto. Where
the note, bill or cheque is lost or destroyed, its holder is
the person so entitled at the time of such loss or
destruction.
HOLDER
Sec.9
Any person who for consideration becomes the possessor of the
promissory note, B.O.E or Cheque before the amount mentioned
in it becomes payable & without having sufficient cause to
believe that any defect existed in the title of the person from
whom he derives his title.
WHEN DOES A PERSON BECOMES A
HOLDER IN DUE COURSE
Before the amount mentioned in the instrument becomes payable.
1) Without having sufficient cause to believe that any defect
exists in the title of the person from whom, he derives his title
2) He becomes a possessor of a promissory note, b.o.e or cheque
.
3) If it is payable to the bearer.
4) Consideration has passed from him.
Method of transfer
An instrument is said to be negotiated
when a promissory note,BOE,cheque is
transferred to any person so as to
constitute that person the holder of the
instrument
Transfer with an intention to transfer the
title of the instrument.
Negotiation by delivery
Negotiation by endorsement and delivery
CONTD-
By payment
By cancellation
By release
To honour cheques.
To keep a proper record of the transactions.