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Bill of Exchange According to section 5 of the Negotiable Instruments Act 1881, a bill of exchange should meet the following requirements: It must be in writing It must contain an unconditional order It must be signed by the maker
Bill of Exchange (Cont’d) The order must direct a certain person to pay on demand or at a fixed or determinable future time. The order must be to pay certain sum of money. The money must be payable to a certain person or to his order, or to the bearer of the instrument.
Parties To A Bill Of Exchange Three parties are necessary to a bill of exchange: The drawer, the person who is the maker of the bill. The drawee, the person who is directed to pay the bill. The payee, the person to whom or to whose order the amount of the instrument is payable.
Holder In Due Course (S-9) Following are the essential conditions to constitute a “holder in due course”. He should be a holder and must be in physical possession of the instrument. He should be holder for consideration. The consideration must be of some conceivable value sufficient to support a simple contract. It may be past or present but it must not be unlawful, forbidden by law or opposed to public policy.
Holder In Due Course (S-9) He should have become the holder without having sufficient cause to believe that any defect existed in the title of the person from whom he acquired the instrument.
Rights and Privileges Of AHolder In Due Course He is protected against all defects of title of persons from whom he receives the instrument. He can recover the amount of the instrument from all previous parties although no consideration was paid by some of them, or a defect of title existed in the party from whom he took it.
Rights and Privileges Of AHolder In Due Course Once a negotiable instrument reaches the hands of a holder in due course, it is purged of all defects, and the subsequent holder is enabled to recover the amount due thereon from all parties previous to such holder. The defence on the part of the person liable on the instrument that it has been lost or obtained from him by means of an offence or fraud, or for an illegal consideration, cannot be set up against a holder in due course.
Promissory Note According to Section-4 of Negotiable Instruments Act 1881, a promissory note should meet the following requirements: It must be in writing. It must not be a bank note or a currency note. It must contain unconditional undertaking.
Promissory Note It must be signed by the maker. The undertaking must be to pay on demand or at a fixed or determinable future time. The undertaking must be to pay a certain sum of money. The money must be payable to a certain person or to his order, or to the bearer of the instrument.