Thursday, 26 March 2020

Law of Negotiable Instruments

0 comments

Law of Negotiable Instruments


A negotiable instrument means a promissory note, a bill of exchange or a cheque.
A promissory note is an instrument in writing (not being a bank or a currency note),
containing an unconditional undertaking, signed by the maker to pay a certain sum of
money to, or to the order of, a certain person or to the bearer of the instrument.
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, a certain person, or to the bearer of the instrument.
A cheque is a bills of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand, and it includes the electronic image of a truncated
cheque and a cheque in the electronic form.
The transfer of an instrument by one party to another so as to constitute the transferee a
holder thereof is called ‘negotiation of the instrument’.
Instruments payable to a specified person or to the order of a specified person can be
negotiated only by endorsement and delivery.
Crossing is a unique feature associated with cheques affecting to a certain extent the
obligation of the paying banker and also its negotiable character.
A cheque may have what is known as ‘not negotiable’ crossing.
A person who takes such a cheque shall not have and shall not be capable of giving a better
title to the cheque than that which the person, from whom he took it in the first instance, had.


Ambiguous Instrument: It is an instrument which may be construed either as a promissory note
or as a bill of exchange.
Bill of Exchange: It is a written order by the drawer to the drawee to pay money to the payee.
Cheque: It is a is a negotiable instrument instructing a financial institution to pay a specific
amount of a specific currency from a specified demand account held in the maker/depositor’s
name with that institution.
Crossing: Crossing on cheque is a direction to the paying banker by the drawer that payment
should not be across the counter.
Endorsement: It is the mode of negotiating a negotiable instrument.
Holder: A holder is a person who is entitled in his own name to the possession of a negotiable
instrument and to receive or recover the amount due thereon from the parties thereto.
Instrument: It means any written document by which a right is created in favour of some person.
Negotiable Instrument: It is a specialized type of contract for the payment of money that is
unconditional and capable of transfer by negotiation.
Negotiation: The transfer of an instrument by one party to another so as to constitute the
transferee a holder thereof is called ‘negotiation’.

No comments:

Post a Comment