Presented by : Shivam Bakshi Shweta Nagpal Nikhil Chaudhary Arbaaz Khan Shubham

INTRODUCTION
Documents of a certain type , used in commercial

transactions and monetary dealings are called negotiable instrument. Negotiable means transferable by delivery and instrument means a written document by which a right is created in favour of some person. Thus negotiable instrument means a document transferable by delivery.

DEFINATION
Negotiable instrument act, 1881 states that :

negotiable instrument means a promissory note, bills of exchange or cheque payable either to order or to bearer Sec 13(1)

Features of Negotiable Instruments

Freely Transferable In Writing Unconditional Certain Sum Signature is must Stamping is mandatory

Types of negotiable instruments

Promissory note

Bills of exchange
cheque

Promissory Note
A Promissory note is an instrument in writing

containing an unconditional undertaking signed by maker, to pay a certain sum of money only to , or to order of a certain person, or to the bearer of instrument .sec 4

Parties of negotiable instrument

MAKER :

He is the person who signs and draws the promissory note and promise to pay the amount.
PAYEE :

He is the person to whom the amount of the promissory note is payable.

Features of promissory note

Must be in writing Unconditional promise to pay Must be signed my maker Specific sum Promise to pay money only stamping

Example of promissory note

Types of promissory note

Promissory note payable on demand

Promissory note payable after date

Bills Of Exchange
A bills of exchange is an instrument in writing

containing an unconditional order, signed by 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. ...sec. 5

Parties Of Bills Of Exchange

DRAWER :

The drawer is the person who makes the bills of exchange. DRAWEE: A drawee is a person who is directed by the drawer to pay the money to the payee. PAYEE: The person who receives the money is called payee.

Features Of Bills Of Exchange

Must be in writing. Signed by the drawer.

An order to pay.
Payee must be certain. Must be properly stamped.

Example Of Bills Of Exchange

Types Of Bills Of Exchange

Bills of exchange payable on demand Bills of exchange payable after date

Inland bills of exchange

Foreign bills of exchange

CHEQUE
A cheque is an instrument in writing containing an

unconditional order, addressed to a banker, signed by the person who has deposited money with the banker, requiring him to pay on demand a certain sum of money only to or to the order of certain person or to the bearer of the instrument. ...sec.6

Features Of Cheque
Instrument in writing. Unconditional order.

Payable on demand.
Certain sum of money. Payee must be certain.

Example Of Cheque

Distinction
cheque
It must be drawn only on banker.

Bills of exchange
It can be drawn on any person including a banker.

The amount is always payable on demand.

The amount be payable on demand or after a specified time.

Cheque can be crossed.

Crossing of bills of exchange is not possible.

Distinction
Promissory note Bills of exchange

There are 2 parties: Maker & payee A note contains an unconditional promise by maker to pay to the payee.

There are 3 parties : Drawer Drawee & Payee It contains an unconditional order to the drawee to pay according to drawers directions.