INSTRUMENTS RELATED EXAMPLE NI, BOE, AND CHEQUE

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INSTRUMENTS RELATED EXAMPLE NI, BOE, AND CHEQUE

  1. 1. SUMMARIZE THE DIFFERENT KIND OF NEGOTIABLE INSTRUMENTS RELATED EXAMPLE NI, BOE, AND CHEQUE.
  2. 2. NEGOTIABLE INSTRUMENTS • The main legislation applicable to negotiable instruments is the Bill of Exchange Act 1949 (Revised 1978). • Negotiable instrument means a written document which creates a right in favour of some person and which is freely transferable. Although the Act mentions only these three instruments (such as a promissory note, a bill of exchange and cheque), it does not exclude the possibility of adding any other instrument which satisfies the following two conditions of negotiability: 1. the instrument should be freely transferable (by delivery or by endorsement. and delivery) by the custom of the trade; and 2. the person who obtains it in good faith and for value should get it free from all defects, and be entitled to recover the money of the instrument in his own name
  3. 3. CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS 1. Title to it passes on delivery or delivery plus indorsement (rights are transferred from person to person) 2. Holder can sue in own name. 3. Notice of assignment need not be given to debtor. 4. Transferor can give better title than he himself has.
  4. 4. BILL OF EXCHANGE • Section 3 (1) Bills of Exchange Act- a bill of exchange is: a) An unconditional order in writing. b) Addressed by one person to another. c) Signed by the person giving it. d) Requiring the person to whom it is addressed to pay on demand or at a fixed/determinable future time. e) A sum certain in money. f) To the order of a specified person or bearer.
  5. 5. CHARACTERISTICS OF BILL OF EXCHANGE 1) There are 3 parties to a bill. - Drawer (person who gives the order to pay) - Drawee (the person to whom the order is given) - Payee ( the person to whom payment is to be made) 2) The bill must be an order to pay. - Does not give the drawee the discretion to pay or not, not required to do something extra. - Not require the holder to sign a form in order to obtain payment. - Must order payment in a particular fund. 3) The bill must be in writing. 4) The bill must be addressed by one person or ‘body of persons’ to another. - includes company, partnership, statutory authority.
  6. 6. 5) The bill must be signed. - drawer or authorized agent 6) The bill must order payment of a sum certain in money and not in goods or services. 7) The bill must be payable on demand or at a fixed/determinable future time. 8) The bill must be payable to or to the order of a specified person or to bearer.
  7. 7. CHEQUES • Section 73 state that cheque is a bill of exchange drawn on a banker and payable on demand. • Types of cheques: 1) Undated cheque -s.3(4)(a): cheque is still valid. - S.12 & 20 – holder of undated cheque may fill in true date of its issue within a reasonable time. 2) Overdue/stale cheque-s.36(3): cheque has been in circulation for an unreasonable length of time. - Generally 6 months, banks will not honour cheque which are more than 6 months. 3) Ante-dated cheque : date is earlier than the actual date of issues (back dated). 4) Post-dated cheque : future dated (but it is not payable on demand as the date is in future).
  8. 8. CHARACTERISTICS OF CHEQUES 1) It is an unconditional order in writing. 2) It is signed by the drawer. 3) It is drawn on a banker/ drawee. 4) It orders the banker to pay a sum certain in money on demand. 5) It is drawn in favour of a specified person (payee) or to his order in favour of bearer.
  9. 9. DIFFERENCES BETWEEN BILL OF EXCHANGE & CHEQUE Bill of Exchange Cheque -Drawn on some person or firm. -Drawn on a bank. -It is essential that a bill of exchange must be accepted before its payment can be claimed. -Does not require any such acceptance. -May also drawn payable on demand, or on the expiry of a certain period after date or sight. -Can only be drawn payable on demand. -A grace of three days is allowed in the case of time bills. -No grace is given in the case of a cheque. -The drawer of the bill is discharged from his liability, if it is not presented for payment. -The drawer of a cheque is discharged only if he suffers any damage by delay in presenting the cheque for payment. -Notice of dishonour of a bill is necessary. -No such notice is necessary. -Not needed. -A cheque may be crossed. -Must be properly stamped. -Does not require any stamp. - A bill payable on demand can never be drawn to bearer. -A cheque drawn to bearer payable on demand shall be valid. -Payment of a bill cannot be countermanded by the drawer. - Payment of a cheque can be countermanded by the drawer.
  10. 10. THE END…. HOPE ALL OF YOU ENJOY OUR PRESENTATION

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