The document discusses various types of negotiable instruments such as promissory notes, bills of exchange, and cheques. It defines each instrument, describes the parties involved, and outlines their key characteristics and differences. Negotiable instruments are signed documents that promise payment of a specified amount on a future date or on demand.

1. Act 1881
In some places of negotiable instruments act also
named as:
Social Security Act 1881

2. History
1. Common prototypes of bills of exchanges and promissory notes
originated in China in the 8th century
2. Later such document for money transfer used by Arab merchants
by Italian merchants in the 12th century
Social Security Act 1881

3. Definition: A transferable, signed document
that promises to pay the bearer a
sum of money at a future
date or on demand.
Examples:
Cheques, bills of exchange, promissory
note, Banker’s drafts, Railway receipts,
Bearer debentures.
http://www.investorwords.com/3226/negotiable_instrument.html#ixzz1WecfMsBS

4. Characteristics
Following are the some characteristics of negotiable
instruments
• Easy to write
• Property
• Title
• Rights
• Presumptions
• Prompt Payment

5. Kinds of Negotiable Instruments
1. Promissory Notes
2. Bills of Exchange
3. Cheques

6. Promissory Note
1. “A document signed by a borrower promising to repay a loan under agreed-
upon terms”.
2. “A short-term debt security, usually with a maturity of five years or less”.
Also called Prom note. Simply it is a promise to pay
http://www.investorwords.com/3351/note.html#ixzz1Wjz8eBmj

8. Parties involved in Promissory Note
• The maker: The person who makes or executes the note promising to
pay the amount stated therein
• The payee: One to whom the note is payable
Conditional
• The holder: A person other than payee to whom he may have endorsed
the note

9. Illustrations
(a) A promise to pay B or order Rs. 500
(b) A promise to pay B, Rs. 500 and all other sums which shall be due to him
(c) A promise to pay B, Rs. 500 and to deliver to him my black horse on 1st January

10. Bills of Exchange
The definition of bills of exchange is much
similar to promissory note.
A "bill of exchange" is an instrument in writing
containing an unconditional order, signed by the
Definition 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

11. Parties involved in Bills of Exchange
• The Drawer: The person who draws the bill.
• The Drawee: The person on whom the bill is drawn.
• The holder: Is either the original payee or any other
person to whom, the payee has endorsed

12. Essentials of Bills of Exchange
• It must be in writing.
• It must contain an unconditional order to pay money only and not merely a
request
• It must be signed by the drawer.
• The parties must be certain.
• The sum payable must also be certain.
• It must comply with other formalities e.g. stamps, date etc.

13. Section 6
A cheque is a bill of exchange drawn on a
Cheque specified banker, and not expressed to be
payable otherwise than on demand.
Simple Definition
A cheque is a bill of exchange drawn on a bank payable always on
demand. Thus, a cheque is a bill of exchange with two additional
qualifications, namely:
(i) It is always drawn on a banker, and
(ii) It is always payable on demand.

14. Specimen of Cheque
ABC Bank
Date_____________
Pay 'A;--------------------------------------------------------------------------------or the bearer
sum of rupees---------------------------------------------------------------------------------only.
Rs-------/-
A/c No---------LF------
Sd/-
No---------------------

15. Parties of cheque
• The Drawer: The person who draws the cheque.
• The Drawee: The person on whom the cheque is drawn.
Conditional
• Third person: Is either the original payee or any other person to whom,
(Drawee) the payee has endorsed

16. Essentials of Cheque
• It is always drawn on a banker
• It is always payable on demand
• It does not require acceptance
• No Stamp is required to be affixed on cheques
• A cheque is usually valid for fix months
• The banker is liable only to the drawer

17. Types of Cheque
1. Order Cheque
Order Cheque is a cheque , which is expressed to be so
payable or which is expressed to be payable to a
particular person without containing words
prohibiting transfer or indicating that it will not be
transferable.
2. Open Cheque
They are payable in cash at the counter of the banks to
the bearer of the cheque.

18. Cont….
3. Crossed Cheque
These type of cheques are not encashed at the counter
but which can be collected only by a bank from
the drawer bank. But these days an individual can
also draw a crossed cheque for the purpose of safety
and security in certain cases.
4. Bearer Cheque
A bearer cheque is that which can be cashed for the bank
by the bearer of the cheque. Any person who is in
possession of a bearer cheque can cash it without any
difficulty.

19. Difference among 3
Promissory Note Bill of Exchange Cheque
1. There are two parties 1. There are three parties 1. There are normally
in promissory note. BOE . two parties in cheque
2. Party names are 2. Party names are 2. Party names are
maker and payee in P drawer, drawee & drawer & drawee
note. holder
3. Maker and payee 3. drawer and drawee 3. Drawer and drawee
cant be same. may b same not same
4. Unconditional 4. Unconditional order 4. On order for
promise to payee to drawee payment
5. Presented for 5. Must be accepted by
payment without any drawee 5. On demand
prior acceptance

20. Partnership Act 1932
Meaning: When more than one persons join to start or run a business.
Definition
Sec. 4: “The relation between persons who have agreed to share the
profit of business carried on by all or any one of them acting for all”.
G. Baker: “A voluntary association of two or more industries for the
operation of an industrial, commercial or other business undertaking”
Partnership is the Agreement between partners

21. Classification of Partners
 Dormant
 Active
 Nominal
 Minor
 Quasi
 Partner without capital
 Limited
etc,

22. Partnership Deed
It is document which contains all the rules and
regulations required for the partnership business.

23. Sole proprietorship
Meaning:
The enterprise carried on under the ownership of one person.
Definitions:
D.W. Stafford:
“It is simplest form of business which is owned and controlled by
one person”
G. Baker:
“A business operated by one person to earn profit”

24. Characteristics
 Ownership of business
 Finance
 Risk
 Secrecy
 Profit
 No agreement
 Easily transferable
 Freedom of Action
 Risk
 Unlimited liability, etc

25. Difference B/W sole proprietorship and
partnership
Sole Proorietorship Partnership
1. By a single person Ownership 1. More than two persons
2. Single authority to Decisions
2. All partner have a right
make the decisions to make decisions
3. Difficulty raising Capital 3. more funds
capital
4. All liabilities faced Liability 4. Liabilities are faced by
by one person all partners
5. Easy to start Formation 5. Documentation
6. Bear by one person Risk 6. By all partners
7. Size of business Size of business Size of usually large
7.
usually small