Notice of Dishonor Contents of notice
1. A negotiable instrument is considered to be
dishonoured if :
1. If it is not accepted when presented for
acceptance
2. If it is not paid when prepared for
payment at maturity or,
3. If presentment is excused or waived
and the instrument is past due or
unpaid.
Notice of dishonour – is bringing either verbally or in
writing, to the knowledge of the drawer or endorser of
an instrument, upon proper proceedings taken, has not
been accepted or has not been paid and that the party
notified is expected to pay it.
The object of giving notice of dishonour is two
fold:
1. To inform the parties secondarily liable that
the maker or acceptor, as the case may be,
has failed to meet his engagement: and
2. To advise such parties that they will be
required to make payment.
Effect of Failure to give Notice of Dishonor
- Any person to whom such notice is not given
is discharged
 Indorser are entitled to notice of dishonour,
mere knowledge by the indorser of non-
payment is not sufficient.
By whom given:
1. By the holder or his representative
2. By or on behalf of any party to the instrument
who might be compelled to pay it to the holder.
 Notice may be in writing or oral
 A misdescription of the instrument does not
initiate the notice unless the party to whom the
notice is give is infact misled thereby
 The identity of the instrument
 The fact that it has been dishonoured by non
acceptance or non payment and
 A statement that the party giving notice intends
to look to the party addressed for payment
Notice to the party who is dead
 To the personal representative if there be one
 To the Inst residence or last place of bussiness
When notice need not be given to the drawer
a. Where the drawer and drawee are the same
person
b. When the drawee is fictitious person or a
person not having capacity to contract
c. When the drawer is the person to whom the
instrument is presented for payment
d. Drawer knew bill would be dishonoured
e. Drawer countermanded payment
When notice need not be given to indorser:
a. When the drawee is fictitious person or a
person not having capacity to contract, and the
indorser was aware of the fact of the time he
indorsed the instrument
b. Where the indorser is the person to whom the
instrument is presented for payment
c. Where the instrument was made or accepted
for his accommodation
 Foreign Bill of Exchange
- Protest id necessary
Discharge of Negotiable Instrument
 A negotiable instrument is discharge
a. By payment in due course by or on behalf of the
principal debtor
b. By payment in due course by the party
accommodating where the instrument is made
or accepted by accommodation
c. By the intentional cancellation thereof by the
holder
d. By any other act which will discharge simple
contract for the payment of money
 e. When the principal debtor becomes the holder
of the instrument at or after maturity in his own
right.
Discharge of an Instrument – means a release of all
parties, whether primary or secondary, from the
obligations arising there under
 Unless and until he accepts, the drawee is not
bound in any way as a party to a bill and the
payee or other holder has no recourse against
him.
 Acceptance should be in writing
Constructive Acceptance

1. Where the drawee to whom a bill is delivered

for accepatance destroys it
 A person secondarily liable on the instrument is
2. When the drawee refuses to return the bill
discharged:
a. BY any act which discharges the General Acceptance – assents without qualification to
instrument the order of the drawer
b. By intentional cancellation of his
signature by the holder
c. By the discharge of prior party Qualified Acceptance – Varies the effect of the bill
d. By a valid tender of payment by a prior
party a. Conditional – payment by the acceptor
e. By a release of the principal debtor dependent upon the fulfilment of a
condition
Material Alteration – Any alteration which changes b. Partial – an acceptance to pay part only
of the amount
a. The inte
c. Local – an acceptance to pay only at a
b. The sum payable
particular place
c. The time and place of payment
d. Qualified as to time
d. The number or the relation of the parties
e. The acceptance of some of redrawees
e. The medium or currency in which payment is to
be made
f. Or may other alteration which changes the
effect of the instrument

Bills of Exchange – an unconditional order in writing

addressed by one person to another, signed by the
person giving it, requiring the person to whom it is
addressed to pay on demand or at a fixed or
determinable time a sum certain in money to order or
to bearers.

When bill may be treated as promissory note?

1. The drawer and the drawee are the same

person
2. The drawee is a fictitious name
3. The drawee has no capacity to contract

Referee in case of need –the person named by the

drawer or indorser as the one whom the holder may
resort in case of need

Acceptance – the signification by the drawee of his

assent to the order of the drawer