Act, 1881
[Act No. 3 of Year 1871]
Course Content
A negotiable instrument may be made payable to two or more payees jointly, or it may be
made payable in the alternative to one of two, or one or some of several payees. [Sec 13]
Negotiable Instrument
Main Features
An instrument may be negotiable either by
Statute: PN, BE and Cheque, or
Usages: Bank Notes, drafts, share warrants, bearer debentures,
scripts and treasury bills.
Characteristics
Freely transferable:
by (1) delivery or (2) by endorsement and delivery
Holders title free from defects:
negotiability means transferability + HiDC acquiring a good title
notwithstanding any defect in a previous holders title.
The holder can sue in his own name
Can be transferred infinitum
Subject to certain presumptions
Negotiable Instrument
Main Features
Presumptions as to Negotiable Instruments:
As to consideration
As to date
As to acceptance
As to transfer
As to the order of endorsement
As to lost instrument
As to holder-in-due-course
As To Dishonour
Promissory Note
A "promissory note" is an instrument in writing (not being a bank-note or a
currency-note) 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. [Section 4]
Characteristic features:
Must be in writing
Must contain an order to pay and not a promise or request
The order must be unconditional
There must be three parties drawer, drawee and payee
The parties must be certain
Must be signed by the drawer
The sum payable must be certain
The order must be to pay money and money only
Must be stamped
Number, place and date are not essential. Oral evidence may be
obtained as to the date and place of execution.
Cheque
Promissory
Bill of Exchange Cheque
Note
Drawer Drawer Maker
Payee Drawee Drawee
Holder Payee Payee
Holder
Endorser Acceptor
Endorser
Endorsee Holder
Endorsee
Endorser Endorsee
Parties in Negotiable Instruments
The maker of a bill of exchange or cheque is called the "drawer"; the person
thereby directed to pay is called the "drawee".
"Payee" : The person named in the instrument, to whom or to whose order
the money is by the instrument directed to be paid, is called the "payee".
"Acceptor": person who accepts the bill. In practice a drawee is acceptor but
a third person may also accept on behalf of drawee.
Endorser: The person who endorces the bill by putting his signature.
Endorsee: Person in whose favour the bill is endorsed.
"Drawee in case of need": When the bill or in any endorsement thereon the
name of any person is given in addition to the drawee to be resorted to in
case of need, such person is called a "drawee in case of need".
"Acceptor for honour" : The person who may voluntary become party to a
bill as acceptor in the event of refusal by original drawee to accept. The
acceptor for honour offer to accept the bill supra protest with a view to
safegaurd the honour or prestige of the original drawer or any other
endorser. This happens when the bill gets dishonoured and a formal
certificate of dishonour, known as protest, is issued.
Holder and Holder-in-due-course
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. [Sec 8]