This document discusses different types of negotiable instruments including cheques, promissory notes, and bills of exchange. It provides definitions and key details about each: - A negotiable instrument is a written order promising to pay a sum of money that is transferable and contains an unconditional promise to pay a fixed amount to the bearer or on demand. - The main types are cheques (drawn on a bank and payable on demand), promissory notes (containing an unconditional undertaking by the maker to pay a certain sum to the payee), and bills of exchange (containing an unconditional order by the drawer to pay a certain sum to the payee). - Each type has standard features like being

1. Negotiable Instruments

2. Negotiable Instruments
• What is negotiable?
• Negotiable means transferable.
• The negotiation that goes on refers to the transfer of the
instrument between two people, or from one bank to
another, or even from one country to another.
• What is an instrument?
• In the broadest sense, almost any agreed-upon medium
of exchange could be considered a negotiable
instrument.

3. Forms of Negotiable Instruments
• A negotiable instrument is a written order
promising to pay a sum of money.
• A document becomes negotiable when it
contains an unconditional promise to pay
money and is payable to a bearer or
payable on demand.

4. Nature of the negotiable instrument
are:
Be in writing
Be signed by the maker or drawer
Be an unconditional promise or order to pay
State a fixed amount of money
Be freely transferable from one to another person
Be payable on demand or at a definite time
Be payable to order or to bearer

5. Types of negotiable instrument
Cheque
Bill of
exchange
Promissory
note

6. Cheque
Definition:(Section 6)
“A" cheque" is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand”.
 NATURE
1. Always drawn on specified bank,
2. Always payable on demand.
3. Unconditional order
4. Certain sum of money
5. Signed
6. Banker name
7. Codes
8. Writing etc.

7. • Open cheque:
• A cheque is called ‘Open’ when it is possible to get cash
over the counter at the bank. The holder of an open cheque
can do the following:
• 1. Receive its payment over the counter at the bank.
• 2. Deposit the cheque in his own account.
• 3. Pass it to some one else by signing on the back of a
cheque.
• Bearer cheque:
• A cheque which is payable to any person who presents it
for payment at the bank counter is called ‘Bearer cheque’.
Types of Cheque

8. • Order cheque:
• An order cheque is one which is payable to a particular
person. In such a cheque the word ‘bearer’ may be cut out
or cancelled and the word ‘order’ may be written.
• Crossed cheque:
• Since open cheque is subject to risk of theft, it is dangerous
to issue such cheques. This risk can be avoided by issuing
another types of cheque called ‘Crossed cheque’. The
payment of such cheque is not made over the counter at the
bank. It is only credited to the bank account of the payee.
A cheque can be crossed by drawing two transverse
parallel lines across the cheque, with or without the writing
‘Account payee’ or ‘Not Negotiable’.

9. Parties of Cheque
Drawer : who makes cheque.
Drawee : Always banker.
Payee : whom the amount payable

10. Standard Features of a
Cheque
Pay ……………………………………………………………………………………………………………......
……………………………………………………………………………………………………. Or Bearer
Rupees ……………………………………………………………………………………………………………
…………………………………………………………………………………………… Rs.
A/c No.
“ΙΙ473792ΙΙ” 000240000 000000 10
AKASH IJAZ
Signature
Please sign above

11. Promissory Note
 Legal definition: (Section 4)
"A" promissory note" is an instrument in writing 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.
 Illustrations :
• A signs instruments in the following terms
• (a) " I promise to pay B or order Rs. 500."
• (b) I promise to pay B Rs. 500 which shall be due to him.“
• (c) " I promise to pay B Rs. 500 seven days after my marriage with C."

12. Parties Of Promissory Note
 Maker : who makes PN.
 Payee : whom the amount payable

13. Essentials Of Valid Promissory Note
 Must be in writing
 Must be unconditional
 Must express promise to pay
 Must in term of money only
 Must pay in certain amount of money
 Must contain certain parties
 Must be signed by maker
 Other formalities like date, consideration
etc.

14. Standard Features of a
Promissory Note
Rs. 10,000
Lucknow
April 10,
2013
Three months after date, I promise to pay Ali Asgar (Payee) or to his order the sum of
Rupees Ten Thousand, for value received.
To,
Ali Asgar,
B-20, Minto
Park,
Lahore.
(Maker)
Stamp
Sd/-
Ram

15. Bill of exchange
 Legal definition: (Section 5)
“ A" bill of exchange" is an instrument in writing,
containing an unconditional order, signed by the 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.”
 Parties Of Bill of Exchange :-
 Drawer : who makes BE
 Drawee : Always ACCEPTOR.
 Payee : whom the amount payable

16. CLASSIFICATION OF BILL
OF EXCHANGE
• Inland and Foreign Bills [Section 11 and 12]
• Inland Bill:
• It is drawn in Pakistan on a person residing in Pakistan whether payable
in or outside Pakistan; or
• It is drawn in Pakistan on a person residing outside Pakistan but payable
in Pakistan.
• Foreign Bill:
• A bill drawn in Pakistan on a person residing outside Pakistan and made
payable outside Pakistan.
• Drawn upon a person who is the resident of a foreign country.

17. Essentials Of Valid Bill Of Exchange
 Must be in writing
 Must be unconditional
 Must express order to pay
 Must in term of money only
 Must pay in certain amount of money
 Must contain certain parties
 Must be signed by drawer
 Other formalities like date, consideration,
attestation etc.

18. Standard Features of a Bill Of
Exchange

19. OTHER TYPES
 Inland instrument
 Foreign instrument
 Bearer instrument
 Order instrument
 Instrument payable on demand
 Time instrument