negotiable instruments act
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This document defines and explains key concepts related to negotiable instruments. It begins by defining a negotiable instrument as a transfer of debt that can include promissory notes, bills of exchange, or checks. It then discusses the Negotiable Instruments Act of 1881 and the characteristics of negotiable instruments such as being freely transferable. The document goes on to classify instruments, define the different types including promissory notes, bills of exchange, and checks, and compare their key elements and parties. It concludes by covering negotiation, assignment, presentment, dishonor, notice procedures, and discharge of negotiable instruments.
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negotiable instruments act
- 2. What is a negotiable instrument Transfer of debt from one person to another Promissory note, bills of exhange, cheque Transferee is rendered the holder of the instrument Transfer is done through mere delivery or endorsement and delivery
- 3. Negotiable instrument act 1881 The act extends to whole of India including Jammu and Kashmir The act came into force on 1st march, 1882 The latest amendment of the act was made in 1988 The act deals with cheques, bills of exchange, promissory notes, hundi
- 4. characteristics Freely transferable Defect free transfer to the transferee Recovery Ceiling on transfers Payable to order Payable to bearer Payment Presumption
- 5. classification Bearer and order instrument Order instrument Inland and foreign instrument Accommodation bill Time instrument Demand instrument Ambiguous instrument Inchoate instrument
- 6. Kinds of negotiable instrument Promissory note Cheques Bills of exchange Hundis
- 8. Essential elements Writing Promise to pay Definite and unconditional Signed by the maker Certain Parties Specific sum Promise to pay money Formalities like stamped, number, date of signature, place
- 9. Parties to promissory note Maker Payee Holder Endorser endorsee
- 13. Elements of bills of exchange Must be writing Order to pay Unconditional order Three parties Drawee and payee must be certain Signed by drawer Sum payable must be certain Formalities like date, place and words ‘ for value received’ and should be duly stamped
- 14. Parties of BOE Drawer Drawee Acceptor Payee Holder Endorser endorsee
- 15. Promissory note v/s bills of exchange Promissory note 2 parties Unconditional promise Cannot be the payee Liability is primary and absolute Notice incase of dishonour is not required Acceptance is not required Bills of exchange 3 parties Unconditional order Drawer and payee can be same Liability is secondary and conditional Notice incase of dishonour is mandatory Acceptance is required
- 16. Forms of bills of exchange Inland bill Foreign bill Trade bill Accomodation bill Documentary bill Clean bill Fictitious bill Bill in set Escrow Bank draft
- 19. cheque
- 20. Essentials of a cheque Must be in writing Drawn on banker Unconditional order to pay Order to pay certain sum Signed by drawer and must be dated Payable on demand Banker is liable only to drawer No acceptance and stamp required
- 21. parties Drawer Drawee Payee Holder Endorser endorsee
- 22. Crossing of cheque General crossing Special crossing Account payee crossing
- 23. Bills of exchange v/s cheque Bills of exchange Drawn on any person Grace period of 3 days Acceptance of drawee is required Payment cannot be stopped Notice of dishonour is necessary It should be duly stamped The act contains no provision for crossing of bill cheque Drawn only on the banker No grace period No acceptance Cheque can be revoked by banker and drawee. Notice may not be given incase of dishonour. No stamp is required Cheque may be crossed
- 26. Negotiation and assignment Negotiation enables the transferee to become a party to contract and to enforce the contact in his own name Assignment refers to transfer of title of an instrument through written and registered document
- 27. Modes of negotiation modes Mere delivery Endorsement and delivery
- 28. Kinds of endorsement blank and general endorsement Full and special endorsement Restrictive endorsement Partial endorsement Conditional endorsement Facultative endorsement
- 29. presentment Presentment for acceptance Presentment for sight Presentment for payment
- 30. dishonour
- 31. dishonour By non – acceptance If bill is not accepted within 48 hours from time of presentment Drawee is incompetent When there are many drawees and all of them do not accept Drawee is a fictitious person By non – payment default in payment by any party Presentment for payment is excused Instrument when overdue remains unpaid
- 32. Notice of dishonour Notice by whom Notice by holder Chain method Notice by principal or agent • Notice to whom all the parties to whom holder seeks to make liable Party or his agent or legal representative or assignee
- 33. Form of notice Written or oral Any form but it should convey that the instrument has been dishonoured. Within a reasonable time
- 34. compensation Compensation to holder Re- exchange Compensation to endorser Re - draft
- 35. Discharge of negotiable instrument By payment in due course By party becoming the holder By express waiver By cancellation By discharge as a simple contract
- 36. Discharge of a party or parties By payment By cancellation By release By allowing drawee more than 48 hours By non – presentment of cheque Material alteration Parties not consenting discharged by qualified acceptance
- 37. Legal relationship between banker and customer obligation to honour cheques obligation to keep a proper record of transactions obligation to abide by instructions obligation to not disclose customer account and affairs Incidental charges and interest Right to set off
- 38. When must a banker dishonour a cheque Insolvency of customer Customer countermands payment Notice of customer insanity On closure of account On suspicion that title of person is defective Notice of loss of cheque When a cheque becomes stale Faulty signature