Negotiation & Discharge from liabilityPresentation Transcript
“When a promissory note, bill ofexchange or cheque is transferred to any person, so as to continue that person the holder thereof, the instrument is said to be negotiated.”
Takes Place in 2 Ways:i. By Deliveryii. By Endorsement and Delivery
EndorsementSection 15 defines:- “when the maker or holder of anegotiable instrument signs the same,otherwise than as such maker, for thepurpose of negotiation, on the back or facethere of or on a slip of paper annexed thereto , or so signs for the same purpose astamped paper intended to be completed asa negotiation instrument, he is said toendorse the same, and is called an“endorser”. the person to whom theinstrument is endorsed is called the“endorsee”.”
Essentialsi. The holder writes and/or signs on the face or back or on a separate paper or stamp paper.ii. The instrument is delivered to the endorsee.iii.The instrument is endorsed and delivered to the endorsee.iv.Endorsement must be genuine and not forged.
Who may endorse ? i. The holder of the instrument ii. The maker signing it otherwise than as such maker. iii. Every maker, drawer or endorsee iv. The payee of an instrument
Effect On endorsement, theendorsee acquires theproperty therein of thenegotiable instrument. Theendorsee gets the right tofurther negotiation unlessspecifically excluded orrestricted.
Kinds of Endorsementi. Endorsement in blankii. Endorsement in fulliii. Restrictive Endorsementiv. Partial Emdorsementv. Conditional Endorsementvi. Endorsement Sans Resourcevii.Facultative Endorsement
Negotiation Back is whenthe transferor again becomes the holder. In case of dishonor only parties prior to his first position are liable. This is to avoid circuit of action.
Discharge from Liability
Definition Whenever a valid negotiableinstrument is created, the parties are liableto pay the amount due on the instrument.So long as the instrument is there , thereare certain rights of actions available.However, when this rights come to end,the instrument is discharged and is notnegotiable. Thus termination of liability ofthe parties is called ‘discharge fromliability’.
two meanings1.Discharge of negotiable instruments2.Discharge of party or parties
1.By cancellation2.By discharge as a simple contract3.By renunciation4.By payment in due course5.By the party primarily liable becoming the holder
Modes of Discharge of a Party or Parties By Qualified acceptance By payment By release By allowing drawee more than 48 hours for deliberation By non-presentment of cheque
Modes of Discharge of a Party or Parties By acceptor becoming a holder Alteration not apparent Material alteration By payment of cheque By cancellation By operation of law
Modes of Discharge of a Party or Parties(QP RAN HAM PCO)
MaterialAlteration Its an alteration which affects the rights and liabilities of parties. The instrument becomes void against those parties who are liable prior to alteration. Material alteration does not affect the liabilities of persons, who become liable after the alteration.