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    Negotiable Instrument

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    Md. Shadman Sakib 1610973630
    1. A bill of exchange is accepted when the drawee signs it, acknowledging liability. Only the drawee, drawee in need, legal representative or official receiver can accept a bill. 2. Negotiation is the process of transferring ownership of an instrument through delivery or endorsement. An instrument payable to bearer is negotiated by delivery, while one payable to order requires endorsement and delivery. 3. The maker of a note and acceptor of a bill are primarily liable for payment. The drawer is liable secondarily if the acceptor does not pay. An endorser is liable if subsequent parties are not paid.

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    Negotiable Instrument

    Uploaded by

    Md. Shadman Sakib 1610973630
    23 views11 pages
    1. A bill of exchange is accepted when the drawee signs it, acknowledging liability. Only the drawee, drawee in need, legal representative or official receiver can accept a bill. 2. Negotiation is the process of transferring ownership of an instrument through delivery or endorsement. An instrument payable to bearer is negotiated by delivery, while one payable to order requires endorsement and delivery. 3. The maker of a note and acceptor of a bill are primarily liable for payment. The drawer is liable secondarily if the acceptor does not pay. An endorser is liable if subsequent parties are not paid.

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    negotiable instrument (1)

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    1. A bill of exchange is accepted when the drawee signs it, acknowledging liability. Only the drawee, drawee in need, legal representative or official receiver can accept a bill. 2. Negotiation is the process of transferring ownership of an instrument through delivery or endorsement. An instrument payable to bearer is negotiated by delivery, while one payable to order requires endorsement and delivery. 3. The maker of a note and acceptor of a bill are primarily liable for payment. The drawer is liable secondarily if the acceptor does not pay. An endorser is liable if subsequent parties are not paid.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    23 views11 pages

    Negotiable Instrument

    Uploaded by

    Md. Shadman Sakib 1610973630
    1. A bill of exchange is accepted when the drawee signs it, acknowledging liability. Only the drawee, drawee in need, legal representative or official receiver can accept a bill. 2. Negotiation is the process of transferring ownership of an instrument through delivery or endorsement. An instrument payable to bearer is negotiated by delivery, while one payable to order requires endorsement and delivery. 3. The maker of a note and acceptor of a bill are primarily liable for payment. The drawer is liable secondarily if the acceptor does not pay. An endorser is liable if subsequent parties are not paid.

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    of 11

    PART-4

    Negotiable Instruments
    ACCEPTANCE
     A bill of exchange is accepted when the drawee puts his
    signature on it. Thereby acknowledging his liability under
    the bill.
     Writing the word accepted is not essential but the signature
    is.
     Acceptance is not necessary in the case of bills of exchange
    payable on demand or at sight unless specifically mentioned.
     Only the following persons can accept the bill of exchange:
    the drawee of the bill
    The drawee in case of need
    The legal representative, when the draweee is dead.
    The official assignee official receiver etc.
    NEGOTIATION
     It is the process by which the ownership of the instrument is
    transferred from one person to another.
     It can be done by following ways:
    Negotiation by delivery: a promissory note, bill of exchange
    or cheque payable to bearer is negotiable by delivery
    thereof.
    Negotiation by indorsement: a promissory note, bill of
    exchange or cheque payable to order is negotiable by
    indorsement and delivery thereof.
    INDORSEMENT
     It means signature of the holder made with the object, of
    transferring the document. The person who makes the
    endorsement is called the Indorser
     Types of indorsement:
    endorsement in full
     when the indorser mentions the name of the person to
    whom the money due on an instrument is to be paid .
    Endorseement in blank.
     where the name of party is not mentioned.
    LIABILITY OF THE PARTIES
    The liability of the parties to a negotiable instrument is
    determined by the following rules:

    Maker & acceptor

    Drawer

    Drawee of a cheque

    Indorser
    LIABILITY OF THE PARTIES
     Maker & Acceptor:
    The maker of a promissory note and the acceptor of the bill of exchange
    are primarily responsible for the payment due.
    The money must be paid at or after maturity to the holder as required. In
    default of such payment, the maker and the acceptor is bound to
    compensate.
     Drawer:
    The drawer of a bill of exchange or cheque is bound in case of dishonor
    by the drawee or acceptor thereof, to compensate the holder.
    Before acceptance, the drawer’s liability is primary; after acceptance, the
    drawee’s liability is primary & the drawer’s liability is secondary. Drawer
    is liable to pay only if the acceptor fails to pay.
    LIABILITY OF THE PARTIES
     Drawee of a Cheque:
    The drawee of a cheque having sufficient funds of the drawer, in
    his hand, properly applicable to the payment of such cheque and
    in default of such payment must compensate the drawer for the
    loss or damage caused by such default.
     Indorser:
    The indorser of a negotiable instrument is liable to all subsequent
    parties in case of dishonour of the instrument.
    DISHONOUR OF A NEGOTIABLE
    INSTRUMENT
     Mode of Dishonour:
    A negotiable instrument may be dishonoured in two ways:
    1) By non-acceptance: only bill of exchange can be
    dishonoured by non-acceptance, since only bills require
    acceptance.
    2) By non-payment: promissory notes, bills of exchange &
    cheque can be dishonoured by non-payment.
    DISHONOUR BY NON-ACCEPTANCE
     A bill of exchange is dishonoured by non-acceptance in the following
    cases:
    1. “When after due presentation, the bill is not accepted by the drawee”.
    When there are several drawees, refusal by any one of the drawee will
    amount to dishonour.
    2. In cases where presentation for acceptance is excused, the bill is treated
    as dishonoured if it is not accepted without presentation.
    3. Where the drawee is incompetent to contract, the bill may be treated as
    dishonoured.
    4. If the acceptance is qualified, the bill may be treated as dishonoured.
    5. Drawee in case of need: where a drawee in case of need is named in a
    bill, or in any indorsment thereon, the bill is not dishonoured until it
    has been dishonoured by such drawee.
    DISHONOUR BY NON-PAYMENT:
     Promissory notes, bills of exchange & cheque can be
    dishonoured by non-payment when the maker of the note or
    acceptor of the bill o f exchange or the drawee of the cheque
    makes default in payment.
    CONSEQUENCE OF DISHONOUR
     Steps to be taken by the holder: when a negotiable instrument
    is dishonoured, the holder:
    1. Becomes entitled to file a suit for the recovery of the
    amount due from the parties liable to pay
    2. He must, give notice of dishonour to parties against whom
    he intends to proceed.
    3. He may also have the instrument noted & protested before
    a notary public.

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