Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
1881
1881..1988/89..2002/03
Deals with three kinds of negotiable instrument
Promissory notes
Bills of exchange
Cheques
Negotiable Instruments
Definition:
The word negotiable means transferable by
or customs of trade:
Promissory Note
Definition:
According to Section 4:
A promissory note is an instrument in writing
(not being a bank-note or a currency-note)
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.
promissory note
The writing may be on any paper or book
Illustrations: A signs the instruments in the
following terms:
I promise to pay B or order Rs. 500
I acknowledge myself to be indebted to B in Rs.
1, 000 to be paid on demand, for value received
Both the above instruments are valid promissory
notes.
terms:
Mr. B I owe you Rs. 1,000
I am liable to pay to B Rs. 500
The above instruments are not promissory notes as
there is no undertaking or promise to pay. There is
only an acknowledgement of indebtedness.
Where A signs the instrument in the following terms:
I acknowledge myself to be indebted to B in Rs.
1, 000, to be paid on demand, for value received,
there is a valid promissory note
Bill of Exchange
Definition:
Bill of Exchange
Illustration:
Mr. X purchases goods from Mr. Y for Rs.
1000/Mr. Y buys goods from Mr. S for Rs. 1000/Then Mr. Y may order Mr. X to pay Rs.
1000/- Mr. S which will be nothing but a bill of
exchange.
Essentials/characterristis of a Bill
of Exchange
It must be in writing
It must contain an order to pay. A mere
request to pay on account, will not amount to an
order
The order to pay must be unconditional
It must be signed by the drawer
The drawer, drawee and payee must be
certain.
A bill cannot be drawn on two or more
drawees but may be made payable in the
alternative to one of two or more payees
Essentials/characterristis of a Bill
of Exchange
The sum payable must be certain
The bill must contain an order to pay money
only
It must comply with the formalities as regards
date, consideration, stamps, etc
BILL OF EXCHANGE
Two Parties
Three Parties
Liability of a maker/drawer is
secondary or conditional
Cheque
A cheque
Cheque
(Truncation means, stopping the flow of the
physical cheques issued by a drawer to the
drawee branch.)
Cheque
A truncated
Cheque
A cheque is a kind of bill of exchange
but it has additional qualification namely1. Always drawn on a specified banker and
2. Always payable on demand without any
days of grace.
Cheque
Requires an acceptance of
drawee
Can be crossed.
Endorsement
When the maker or holder of a negotiable
instrument signs the same, otherwise than as
such maker, for the purpose of negotiation, on
the back or face thereof or on a slip of paper
annexed thereto, or so signs for the same
purpose a stamped paper intended to be
completed as negotiable instrument, he is said
to endorse the same, and is called the endorser
Endorsement
Indorser and Indorsee.
Who may indorse?.....second signature of
drawer/maker.signature of payee or indorsee
If payee is an illiterate person, he may endorse
the instrument by affixing his left hand thumb
impression thereon, but the same should be
duly witnessed or attested.
Endorsement
Kinds of Endorsements:
1. Blank or general
2. Endorsement in full or special endorsement
3. Partial endorsement
4. Restrictive endorsement
Endorsement
5. Conditional endorsement
a.Sans recours endorsement: without recourse
pay X or order san recours
b. Liability dependent upon a contingency
c. Facultative endorsement: endorser expressly
gives-up some of his rights
d. Sans frais: when endorser does not want
the endorsee or any subsequent holder of
the instrument to incur any expenses on his
account on the instrument
9. Negotiation Back?
Endorsement
Facultative endorsement: endorser expressly
gives-up some of his rights
8. Sans frais: when endorser does not want
the endorsee or any subsequent holder of the
instrument to incur any expenses on his
account on the instrument
7.
Negotiation Back?
Discharge
Discharge
Discharge
One
Discharge
5. By taking qualified acceptance
6. By not giving notice of dishonour
7. By non-presentment for acceptance of a bill
8. By delay in presenting cheque
9. By operation of Law
a. By an order of Insolvency
b. By Merger
c. By Lapse of Time
9. By material alteration
Presentment of NI
Presentment means showing an instrument to
the drawee, acceptor or maker for acceptance,
sight or payment.
1.Presentment of BoE for acceptance
2.Presentment of Promissory notes for sight
3.Presentment of Negotiable Instrument for
payment
Presentment of NI
It
of acceptance:
1.General acceptance
2.Qualified acceptance
Conditional
Partial
Qualified as to place
Qualified as to time
Acceptance by some of the drawees, but not
all
Dishonor
It may be by non acceptance or non
payment
A bill of exchange can be dishonored by
non acceptance in the following ways1. If the drawee does not accept the bill within
48 hours from the time of presentment
2. If there are several drawees and all of them
do not accept it.
Dishonor
3. When the drawee has become insolvent or
dead
4. When the drawee is incompetent to
contract
5. When the drawee is a fictitious person or
after reasonable search can not be found.
Dishonor
Dishonour by non-payment:
When maker of the note, acceptor of the bill
& drawee of the cheque makes default in
payment.
Notice of dishonour
Notice by whom:
By holder or any prior party
Chain method of giving notice of dishonour
By principal or agent
Can not by any stranger
Dishonor
Notice
to whom
Notice to all parties whom the holder seeks
to make liable
Notice to parties or his legal representative
or assignee
Liability of A Banker
Relationship
Liability of A Banker
The
Liability of A Banker
Prime
Liability of A Banker
1.
2.
3.
4.
5.
6.
7.
Liability of A Banker
1.
2.
3.
4.
Liability of A Banker
5. When banks comes to know about the defects
in the title of the person presenting them
6. When the funds are not properly applicable to
the payment of a cheque.personal a/c
chequefrom trust a/c
7. When a/c is closed before presenting the
cheque
8. When the cheque is post dated and presented
before date.