Presented by:Nalini Kaifil

A negotiable instrument is a written document which entitles a person to a sum of money which is transferable from one person to another by mere delivery or endorsement .

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Freely transferable Title of holder free from all defects Recovery Presumptions

Considerations Date Time of acceptance Time of transfer Order of endorsements stamp Holder presumed to be a holder in due course Proof of protest

Negotiable by statute

Negotiable by customs or usage

Promissory notes
Bills of exchange cheques

Exchequ er bills
Share warrants Dividend warrants Share certificates with blank transfer deeds

DEFINITION:(SEC.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 order of a certain person, or to the bearer of the instrument.

THERE ARE TWO PARTIES IN PROMISSORY NOTE THAT ARE: MAKER PAYEE

1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11)

WRITING PROMISE TO PAY DEFINITE & UNCONDITIONAL SIGNED BY THE MAKER CERTAIN SUM OF MONEY PROMISE TO PAY MONEY ONLY BANK NOTE OR CURRENCY NOTE IS NOT A PROMISSARY NOTE CERTAIN PARTIES FORMALITIES LIKE DATE,PLACE,CONSIDERATION ETC. IT MAY BE PAYABLE ON DEMAND OR AFTER A DEFINITE PERIOD OF TIME IT CANNOT BE MADE PAYABLE TO BEARER ON DEMAND

According to (Sec.5) A BILL OF EXCHANGE IS AN NSTRUMENT IN WRITING CONTAINIG 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,ACERTAIN PERSON OR TO THE BEARER OF THE INSTURMENT.

THERE ARE THREE PARTIES TO BILL OF EXCHANGE THAT ARE : 1) DRAWER 2) DRAWEE 3) PAYEE

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5) 6) 7)

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IT MUST BE A WRITTEN DOCUMENT IT MUST CONTAIN AN ORDER TO PAY THE ORDER MUST BE UNCONDITIONAL IT REQUIRE THREE PARTIES,I:E DRAWER,DRAWEE&PAYEE THE PARTIES MUST BE CERTAIN IT MUST BE SIGNED BY THE DRAWER THE SUM PAYABLE MUST BE CERTAIN IT MUST CONTAIN AN ORDER TO PAY MONEY THE FORMALITIES RELATING TO DATE,PLACE,CONSIDERATION ,NO.

PROMISSORY NOTE
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BILL OF EXCHANGE
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TWO PARTIES UNCONDITIONAL PROMISE DEBTOR LIABILITY IS PRIMARY AND ABSOLUTE PAYABLE TO MAKER HIMSELF IMMEDIATE RELATION WITH THE PAYEE REQUIRES NO ACCEPTANCE

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THREE PARTIES UNCONDITIONAL ORDER CREDITOR LIABILITY IS SECONDRY AND CONDITIONAL DRAWER AND PAYEE MAY BE ONE AND SAME PERSON IMMEDIATE RELATION WITH THE ACCEPTOR NOT THE PAYEE REQUIRES ACCEPTANCE BY DRAWEE BEFORE IT IS PRESENTED FOR PAYMENT

A Cheque is a document or instrument that orders a payment of money from a bank account .

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DRAWER DRAWEE PAYEE AMOUNT

BILL OF EXCHANGE
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CHEQUE
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MADE BY ANY PERSON ,INCLUDING A BANKER IT MAY NOT BE CHEQUE IT IS ACCEPTED BEFORE THE DRAWEE CAN BE CALLED UPON TO MAKE PAYMENT IT MAY BE PAYABLE AFTER THE MATURITY DATE.

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ALWAYS DRAWN BY BANKER IT MAY BE BILLS OF EXCHANGE IT DOES NOT REQUIRE ACCEPTANCE IT IS ALWAYS PAYABLE ON DEMAND ON A SPECIFIC DATE

Crossing: (sec 123 to 131A) Purpose of crossing: Cheque can be crossed by two types: - General crossing - Special Crossing - Restrictive Crossing

According to sec 84 cheque must be presented to bank upon which it is drawn Cheque must be presented within its validity period. The drawee (bank) must have sufficient funds of drawer to make the payment An obligation of the banker to honor the payment of cheque.

The "holder" of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. Where the note, bill or cheque is lost or destroyed, its holder is the person so entitled at the time of such loss or destruction.

Holder in due course means any person who for consideration became the possessor of a promissory note, bill of exchange, or cheque, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the person from whom he derived his title. A person is a holder in due course when he proves that
i. ii. iii. iv. v.

Get with Consideration Possesses the instrument Get before maturity Get in good faith Received complete and regular on the face of it.

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Holder in due course can file a suit in his own name against the parties liable to pay. He is deemed prima facie to be a holder in due course. Every prior party to the instrument is liable to a holder in due course until the instrument is duly satisfied. The other parties liable to pay cannot plead that the delivery of the instrument was conditional or for a specific purpose only.

4. Even if the negotiable instrument is made without consideration, if it gets into the hands of the holder in due course, he can recover the means of a forged endorsement. 5. The person liable cannot plead against the holder in due course that the instrument had been lost or was obtained by means of an offence or fraud or for considerations.

Transfer by Negotiation -negotiation by delivery -negotiation by endorsement &delivery Transfer by Assignment

Literal meaning of the term endorsement is writing on an instrument. Endorser - The person who signs on the back or on the face of the instrument or on the slip is an endorser. Endorsee - The person to whom the instrument is endorsed is called the endorsee.

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Blank or General endorsement Full or Special endorsement Restrictive endorsement Partial endorsement Conditional endorsement

 Negotiable instruments, Promissory notes and

Cheques may be dishonored by non payment.

Bills of exchange may be dishonored by non

payment or by non-acceptance as they require acceptance from drawer.

When a promissory note or bill of exchange is dishonored, the holder can, after giving due notice of dishonor, sue any or all parties liable thereon.

Noting means the recording of the fact of dishonor by a Notary Public upon the instrument, or upon a paper attached thereto or partly upon each, within a reasonable time after dishonor(SEC.99, para 1)

when a promissory note or bill of exchange has been dishonored by non-acceptance or non-payment, the holder may, within a reasonable time, cause such dishonor to be noted and certified by a notary public. Such certificate is called Protest . (Sec. 100, para 1)