200 Negotiable Instrument

3 Where a chequeIs crossed generally, or specially, the holder may add the
words·not negotiable'.
4. Where a cheque Is crossed specially, the bank to which It Is crossed
may again cross it especially,to another bank or his agent for collection.
5. When an uncrossed cheque or a cheque crossed generally is sent to a
bank for collection , the bank may cross it especially to itself .
Clmltlcllllon of Ne1at1'I• lnatrumente
• Inland nabwnent
A note, bill or cheque drawn or madein Pakistan payable In, or
drawn upon any person resident in Pakistan shall be deemed to be an
inland instrument.(Sec.11)
2. f Wlll I lt4b lftt
Any such instrument not 80 drawn, made, or made payable shall
be deemed to be a.foreign instrument. It means an instrument which is not
an inland instrument is deemed to a foreign instrument (Sec.12)
3. ...... ........... nt
A negotiable instrument is payable to bearer which is expressed to be
so payable or on which the only or last endorsement is an endorsement in
blank. When an instrument is payable to bearer, the holder of it is entitled to
receive the payment . (Sec.13)
4. Order ....bunent
A note, bil , or cheque is payable to order which is expreased to be
80 payable or which is expreessd to be payable to a particular person and
does not contain woids, pt otliblting transfer or indicating an Intention that It
shaft not be transferable (Sec. 13(1))
5. Allll l au aua ................
An instrument which cannot be clear1y identified either as promissory
note or as bill of exchenge is an ambiguousinstrument. It is a
faultyInstrument. Its holder may treat IIaa •bill of exchenge or promiaaory
note, for example, when in a bill the dlawer and the drawee are the same
per90n9. (Sec. 17)
e. Dltrleccnc1 In ,....,..mid worll1
If the amount undertaken or ordered to be paid is stated differently
in figures and in words, the amount stated in words shaft be the amount
undertaken or ordered to be paid provided that if the words are ambiguous or
uncertain, the amount may be ascertained by referring to the figures.(Sec.18)
7. kwb a-nt pa1ll •- ll1r1nd
A note or bill is payable on demand (a) where it is expraased to be so
or to be payable at light or on preeentmen1 or (b) where no time for
payment is specified in It or (c) where the note or bill accepted or indorsad
after it is over
Nogol lable 1ns1rumen1 191
SPECIMEN OF A BILL OF
EXCHANGE
As. Lahore,2nd Auguat

Throe months after date. pay to C or order lhe sum of Rs.

Six thousand only for value received

To Amin
123,Muslim
Town Lahore
ef S1amp
Sd/
Bashir
The drawer or the payee in case of endorsement Is called the •
holder'. The holder must present the bill to the drawee for his
acceptance. When the drawee accepts the bill,by writing the words
'accepted' and signs 1t, he Is called the acceptor'. •
If the bill 1s drawn·Pay to me or my order', the drawer also
becomes the payee. A ·drawee' may also become the ·payee' when bill
1s subsequently endorsed 1n favour of the' drawee' Similarly, when one
draws a bill upon him, the drawer will become the drawee also.But in this
case the holder may treat it as a bill or as a note.
Easentlals
The following are the essentials of a bill of exchange:
1. In writing
A bill of exchange must be 1n writing. A verbal order to pay cannot
be called bill of exchange. The law does not explain about writing. In
practice, the bill of exchange 1s written on stamped paper or on form. It 1s
written 1n ink. It may be printed or typed.
EXAMPLE
A draws a bill on B as:"Pay Rs.5000 to X or order•.It is a valid bill.
2. Uncondltlon•I Order
The language used in a bill should convey an order to pay . The
order to pay must not depend upon the happening of an event. It must be
uncond1t1onal.
EXAMPLES
a. A draws a bill on B, as *Pay Rs. 5000 to C as early as possible.• It 1s
not a valid bill.
b A draws a bill on B, as *Pay As.5000 to C or order.* It 1s a valid bill
as it is unconditional.
c. A draws a bill on B,as *Mr.X please let the bearer have As .500 and
obliged*.
It 1s not a vahd bill as it contains a request and not an order.
202 Negollable lnatrument
13. B•nk Drllft
It is an order issued by one bank to another bank or to its branch to
pay a specified sum of money to a specified person or his order.It ia a
negotiable
instrument lke a cheque.Its payment cannot be stopped. It is also known
as demand draft
14. ............
Bill of exchange drawn in parts is called bills In sets. Some
proylalons relating to bills In sets are (a) each part must be numbered(b)
each part must contain a provision that It shall continue to be payable only
so long as the other
parts remain unpaid (c) each part must contain reference to the other parts
(d) each part must be signed and delivered by drawer (e) all the parts of
the whole set need not be accepted(f) when a person accepts or indoraea
diff•ent pal1B of the bill in favour of different persona, he and the
subsequent endorsers of each part are liable on such parts as a it were a
separate bill (g) as between holders In
due course of different parts of the same set, he who first acquired title to hia

Doc........., ...
part
is entitled to the other parts and the money represented by the bill (Sec. 132-
133)
11.
When documents relating to the goods repreaented by the bill,e.g.,bi
lof
lading or railway receipt, marine insurance policy etc. are attached to a bil
, the
bill ls called a documentary bill.
11. CIHn 8111
When no documents of title relating to the goods and other documenta
are attached to the bill, It is called a cleanbill.
17. Tt ad• •11
A bill may be trade bill or accommodation bill. When a bill is
drawn,
accepted,or endorsed for consideration,it is called a trade bill
11. ll!acrow
When a negotiable instrument is endorsed and delivered
condltlonaHy or for a apecialpurpose only, e.g.,as collateral security or for
safe custody,and not for the purpose of tranSferring absolutely property
therein,is called an 'Escrow'.
In this case, the property in the instrument does not pass to the endorMe.
The liability to pay in case of an escrow does not arise ti conditions agreed
upon are
not fuHllled or the purpose for which the instrument was dellvered is not
satisfied. It does not affect rights of a holder in due course. (Sec.46)
llllturlty of Nagallellle Instrument
Maturity means the date on which the payment of Instrument faKa
due. The Instrument payable on demand becomes payable
immediately.The cheque
Is always payable on demand so there Is no question of its maturity.
An
Instrument which Is not payable on demand becomes mature on the third
day
 •

190 Negotiable Instrument

14:f.i$1U!4
A note signed by A,·1 promise to pay B As. 500 on 1st January next• is
a
valid note.
9. Other Form•lltl••
Some other formalities are also necessary:
a. The place should be mentioned where It Is made.
b. The date should be mentioned on which it Is made.
c. The promise to pay must be for lawful consideration.
d. It must be properly stamped under the Stamp Act.
e. It is necessary to cancelall the stamps affixed on the note.
lmport•nt Points
The following points regarding promissory note are important:
1. A note payable "only to a particular person• Is valid even though It Is
not a negotiable instrument as It restricts Its transferability.
2. A promissory note cannot be originally made "payable to bearer•,
because State Bank of Pakistan prohibits the Issue of such promissory
note.
3. It can be drawn 'payable to order' originally
4. On endorsement In blank It can become •payable to bearer• or
•payable to bearer on demand" subsequently.
5. A bank note or a currency note Is not a pronote as It la money Itself.
BILL OF EXCHANGE
Definition
"A bill of exchange Is an instrument In writing containing an
unconditional order, signed by the maker, directing a certain person to
pay on demand or at a fixed or determinable future time a certain sum of
money only to, or to the order of, a certain person or to the bearer of the
Instrument.• (Sec. 5)
The person who makes the blll Is called the drawer. The person
who is directed to pay is called the rtrawee.The person to whom the
payment Is made is called the payee
Negotiable lnl1rument

201 due, as regards the person accepting or

indoraing it The expresaiona, 'at aighr and 'presentmenr means on
demand.(Sec.19)
I. lnclloete lubu1nent
It is an incomplete instrument. A person signs and delivers to
another, a blank or incomplete stamped instrument and authorizes the other
person to convert itinto negotiable instrument by fining the blanks,When
theInstrumentIs filled up,the signer become• liable on the instrument. The
signer is liable to the amount specif ied therein but not exc11ding the amount
covered by the stamp. But no person other !Mn a holder in due courae lhd
recow• from the person
delivering theInstrument anything in exoeea of the amount intended to be
paid by him.(Sec.20)
I. n- 11111& 2111t
A time instrument means the instrument In which time for payment
la mentioned.A note or billls a timeInstrument when It iie>1prea11d to be
payable
(a) after a apeGlfled period (b) on a ap«:lflc day (c) after light (d) on the haPPlng
of event which is certain to l'lap-,>en.
The expreaalon 'after light' means (a) in a note, aft•presentment
fOr sight (b) in a bil, att. acceptance or nollng for non .ccepfanOe or
pnieeat for non-acceptance.A cheque Olll'lnol be a timeInstrument becauM
the cheque la alwaya payable on demand. (Sec.21)
10. l'talltl•t• ...
A flclltloul bill la a bill In which the name of the drawer or the s-yee
or both la fictitious.When both the drawr and payee of a billare flctilloua
per9008, the acceptor la liable to holder In due courae If the holder in due
oourM can Mow that the signature of the 11d dlawer and that of the fir9t
lndoraer (payee) are in the same hand#1ltlng.(Sec. 42)
11. •==•-•11•11•11 ...
An accommodation billmeana a bll which la drawn and accepted
without consideration.The accommodated party cannot, after he has pald the
amount of the bil , reco"8r the amount from any party who became a party to
the bill for his aocommodation. The holder In due courae may recover the
amount of such bill from any prior party. The party accommodating la called
the acoonvnodatlon Party.Tha party aooommodated la call1d the
ecoornmodated Party.(Sec. 43)
12. U11i11leil ..
When the date of a bill la not mentioned and where the date of
the acceptance of a bill, payable at a fixed period after light la omitted,,any
holder may Insert the true date of iaaue or eoceptance u the cue may be
and such
lnaertlon ia valld.The Instrument cannot be considered Invalid merely because It
ia Undated.
Nego!iable lnatrument 193
7. l'•klaunl Currenor
It is neceuary that the payment must be made in Paklatanl currency
and not 1n foreign currency, notes or other articles. tt the bill contain• an
order to pay money and aomethlngin addition to money,It cannot be called a
bHI.
EX AMPLE
A drawa a bill on B aa: "Pay Rs. 50000 and deliller 100 bega of wttaat
to
X." It la not a valid bill.
8. 011&• POI W •lltlaa
Other torrnalltiee like date, place, attea&atlon, conalct. tlon, etc., are
usually mentioned in lhe bill but they are not •••ntialin law. Ho ver. It 18

n
.. . . .. . . . . .. ... . ... .
atamp.
e c e a a a r y tN lt a b in muat be affixed with the nece11ary

The following poll 1ta regarding bll muat be noted:

a. A bill of exchange dlrectlug to pay "only to a particular peraon" la valld.
BuJ It la not negctiable in9trument according to the delli'lltlon becaUM
lta tranefetilblli y 18 reelt lcted.
b. A bill can be originally drawn "paytlble to bearer" but It must be
payable otherwlae than on demand.(aay, thr"monthl mter date).In other
words, a bill cannol be drawn "payable to bearer on demand"
c. A blU diawn · on demend" must be made "payable to order".
• rrU•NC• R I WBN PllGNOI• AND A alLL OP DCHAN•

1.... . .. . .. ....
...
The poll1ta of dlff-.nce bebr·11n tt.two are fo ll owa.
.,
In a promillO'Y note, there are In a bll of exchange there may
two be thrrr partiee, the dlawer, the
partiee, lhe .....,and the paYM. dta£MI and the pay11.

a............ ..,•• In a bllthe diau:Mr and pay11may

In a proTlllaiY note the mllker be the 1 1 we permi when It
cennot be the pe)l91 becaUM the iidrawn ·Pay to me or my order'.

.. ... .. . ..
18nt perton cannot be the promi80r

.. ..
and the prornlaee.
I.Pu
t o
e
m
p
111..... oa •r r
i ke th
a ym
e t.n

make the payment.

Ina proml110. note there II-a proml 11
The lllbllty of maker of • In a bll of exchange there la an order
promiltory to
nol•la primary.
•
The 'r'allly of a mllc er of a bll of
exchange 11HCondary.The drawer
la llable when the acc.ptor doee
not
204 Negohable Instrument
post dated cheque before the date mentioned therein cannot be called
as payment 1n due course
2. Good F•lth •nd Without N..llgence
The payment must be made in good faith and without negligence. It
must be made under the honest belief that the person demanding
paymentis legally entitled to 1t. The payer must not be guilty of any
negligence in making payment If the payer makes payments, without
making necessary iAqu1ry in case of suspicious circumstances, such
payment cannot be called payment 1n due course.
3. Holder of Instrument
The payment must be made to a person 1n possession of the
instruments who is entitled to receive payment. A payment without
requiring production of the instrument is not a payment in due course. The
payer must see theinstrument before payment. He must also obtain the
instrument on payment.
4. L. •ITender Money
The payment must be made in money only, unless the holder
agrees to accept payment In any other medium or by cheque or draft.

SHORT ANSWER QUESTIONS

1. Define a promissory note?

2. Can a promissory note be made payable to the bearer on demand?
3. What Is a bill of exchange?
4. How many parties are there In a bill of exchange?
5. What is a cheque?
6. How many types of cheques are there?
7. What Is an open cheque?
8 What is a crossed cheque?
9. WhO may cross a cheque?
10. What 1s the advantage of crossing a cheque?
11.
-
What is an inchoate instrument?
12. What are foreigninstruments?
13. What is an accommodation bill?
14. What Is documentary bill?
 Pllpotlable lnltrunall 203
after the day on which it la expi111acf to be payeHe . Theee 3 days are ca 1cf
Days of Grace.
C•lc lll•ll•• fllf 0 &e fllf •tlwMJo
The maturity of I bl or nole la Cllculllld U under . (Sec 23-25)
1. H 8 note OI bil is pay able at tleled rurQw of ITIClllhs after date OI after
tight. or after a certain ...ent, It becon 21 peyeble after 3 days of the
"'°'
con11poodl11g date ol lhe "'°'...
dh .......11 . j nuriJer of
2. H the monlh in which lhe period tw1111lnat11 t.a no C01Tl ll0ildl11g c:llly, ii
becxnl Bl INIUr8 on lhe IMIday of the ITICllllL
3. The day on which the bll 01 note II drawn, 01 Pf l11illd for . OI
sigl-., ot the day on whi:ti ...eu•il t'll'*-.11_.edld
4. When the day on wtich a ,_«bl 11at llllllllty 18a holdly, the lnllrumlnl

,,,
,. ,
1a d11med to be due an ._ n..a .,,..•v n ' 111 c11y
5. The expreellon 'pubic
y. hdldey' lnclud11 $undllJ9, n ll'f Olt• day
b e
pub lic
declm9d br the FederW Gou1m1n.11t br nc• r11111n the o•, 'Ga ..,.to

a. :,, II cf 30 .lllnullfy W N la O'lldl plJTtie t ma•1 aftlr dale, The dale

of maturity t•on Hardi 2005.
b. A bl, dated 31Jue, 2005 11IMde PIW II*2 mol#•aftll' dall The -bl II Iii
"'8tUrilY on 3 Odollia< 2006,
c. A bll pe71ble 30 dlJI dar light II pr111 lltl tur light on Ill MmrWi 2005.It
tale due on 3 Aprll 2005,
d. A bll, dalld 11"Jnmy 2005, II PIW Ible 3 mue••....dldl.
It ....due on 1411 April 2005, which Nlppllw to be a &nay, Aa
IUCh I ..due on 13" April 2006, I.e. ...precia•ig bi I 111dly
wl•
1

Pa)s 1lll ln Due C0 11

of the
. IOI inltrumlnt In good fdh Ind ,

to ll'f pel'IOn In
Payment In due CDUrl8" m1179 peym11il ineocordlliCI wlh the .,...,..,.
thfreof u11d1r negllglftCI
wtti1 do 1¥11 &lord a r r an rtll
po111111on
ground for b•l•Wlg that he .. not •illlled to Nellv9 peymlnt of "'
ll'nCMll ttllfliI mlltUoned. for I lril In due courle ...lcJla lJli IQ
OOIM )(Ill•rn&ml be fullllacf:(Sec.10)
t. "''IFI RI T& R lr
The peymllil nlUlt be In acccAdlinol wllh ....... d ..
inltNmenl A payment bllcn rnady mmot be c&ll ti a peymllil In due
courle. Thu&, I bll .JI ptld llllcn'"' llll dly of i'W Ind II - ll QtJ l
Illy lndol'la cl CMI,la vdd In the hlnda of holdar In due oour. and
......., wll be l1tle to pay 9G In an .. S' ;Ir ;\.a .,.._,.br
a• lk d a
•
 ,., gotilble 195
Instrument
CHIQU
I
Definition
·A pheque ia a bill of exchange drawn on a spedfied bank and not
eicpressed to be payable otherwiM than on demand." (Sect. 6)
The person who drawa the cheque la called drawer. The bank on
which
the cheque la drawn is called drawee. The person to whom the cheque is
made

. .. . .. .
p a y.a.b.le i s c alled payee•
The following are 11a1ntlal8 of a cheque:

. 1. 111 wrillll9
The cheque nut be In writing .Chlqu. which are pel111ed or made
ou1 on a t)llswrbr are ellC> V9ld. Bankl dllcaurllge Iii blclu11 IUCh
cheques can Niiiy be .itlred. Cu11Dmll"a ndi be 8llOOUf'809d to
draw cheques In Ink.Chequla preperect In lead pencil are rwturned unsilkt.
E X A M PL.l S
A dllWI a cheque in lhefollowtng tennl:
a Pay X or *'*
b. Pay x Ra.500.
Ra. 500.

The above chequet .,.valid.

Z. UR IDR IHIR..01•1r
It nut COnlaln an oidlr te> pay unooidlloi 1ty. H lhe bllr*
11 Oldlred to pay upon lhe COtdtiun of pay11'a llg1111g lhe receipt , thin
lhe lnl1rument la a oor.dRlcMll ordlr and ttu not •cheque.
lX A M PL L S
•· A dlawe •cNQ111 ey C Ra. 300." It II •valid cheque.
b. A dtilWI •cheque "Pay C RI. 400,• you can." It la not 1valid cheque
uI la
COidlkMll.
J. 111111• w DtsJ11r
A only II It II llgllld by lhe
wl • ho6dlr or
by IOIMOM who II UhOlimd to lignon hll bit II.
EXAMPI I
A cnwa • cheque but m. not llgn thereon . "Pay M, RI.500." It II
not •
valld cheque.
4. PC I fl elle fl •
A II _,.,. dra.i pay.bll on dlrmnd. The dlrMnd lhould
be made wl hln a ,......,.. tine. ltl ,......,, lhe chequ1 1nu! be
pr111nted wjthln six monlh from lhe date of la1ue.
194 Negotiab e
Instrument
honour the bill of exchange.
11. Mekef'• "o•ltlon
The maker of a promissory note The drawer of a bill stands in an
stands 1n 1mmed1ate relation with immediate relation with the
the payee. drawee and the drawee with payee.

I. U...tlty of Dwawer The drawer of a bill of exchange is

The maker of a promissory note the
is
debtor and he promises to creditor and he directs the drawee
pay. . to
pay.
7...,.... 0 . . .,
A promissory note cannot be A bill of exchange can be drawn
drawn payable to bearer. payable to bearer but it is not
drawn payable to bearer on
1.Aco...-e demand.
A promissory note needs no
acceptance as 11 1ssigned by A bill of exchange needs
the person who 1s liable to pay. - acceptance by the drawee before it
11.Netto• of Dtehonour is presented for payment.
In case of a dishonour of a note
there Is a no need to give a notice In case of dishonour of a bill of
of d1shonqur to the maker. exchange, there is a need to give
10... ...to .... notice to all prior parties.
A promissory note cannot be
made A bill of exchange can be made
payable to the maker htmaett. payable to the maker himsett as
one person may become the draw.r
and payee or drawee and payee.
11.Cop...
A promissory note cannot be A foreign bill of exchange can be
drawnIn sets. drawn in sets.
12..... ..
A note need not be A, foreign bill of exchange must
be
promissory protelled for dishonour.
protested.
13. Certeln ,.rovl•l- presentment for acceptance, and
The provisions relating to acceptance for honour are not
 applicable in promissory note.
The provisions relating to
pr"entment for acceptance, and
acceptance for honour are
applicable In bill of exchange.
N 11able Instrument 197
S.hr•ll • to •••••-Daa1arMI
A cheque drawn·payable to bearer A bill of exchange drawn ·payable
on to bearer on demand'is not valid.
demand' is valid.
4. Aco .-• A bill of exchange requires
A cheque does not require acceptanc:4)
aoceptance by the drawee before payment.
by the drawee before payment.
s.Grae•D•r• A bin of exchange la drawn
A cheque IS payable on demand. peyable after a cet1aln period Three
There is no question of allowing grace days are allowed In
grace calculating the maturity date
days.

e.at.. ..,
A cheque does not require any stamp. A bill of exchange requlree
according to the Stamp Ad.
7. er. ....
A cheque le crossed tor the purpose
of
safety.
1.N•lll•er P1aN:at In bill of exohange, there la need of

•...• . . . ....,.,.......
In cheque there Is no need of notil!gMd proteet .
noting

and pro t e s t.

The payment of a cheque can be The payment of bll of exchange

stopped by the drawer.
10. N•ll11of Dl•"-t•ur
The notice of dilhonour la not
required
in cheque.
cannot be Mopped by the dlawer.
The nQtiM of dlahouour II required
in
blU of exchange.

Typaa of Cha11ue
Tha cheque may be divided in the lolowlng two typet:
1. Op:111 Cls111ue •
An open cheque 11payable at the counter of the bank on the pra
 11ntatlon
of the cheque.It need not be pre11nted through a bank aocount.It hal two
kindl.
•. .....c.. ...
In a bearer cheque the paying benk f\91d not check the authentlclly
of the holder ot the cheque. There la a g,..t rilk lnvolvwd In thle cue.H
thle chtque goes into wrong handl, he may get the payment from the
bank unleu "' payment has already been llopped.
It. Order Clseque
It is also payable at the counw of the bank. It iipaid by the bank
after being satisfied about the true ldentlly of "9 holder of 1918 chlque.
196 Negotiable Instrument
14:f.i.1.IQ!•
A draws a cheque on 1st June, 2003 as: "Pay X Rs.500." It Is valid
tlU six
months.
5.Certain Sum
The amount mentioned in the cheque should be certain. There
should be no element of doubt.In practice,banks return the cheque if the
amountin words and figures differs. •
EXAMPLE
A draws a cheque as: "Pay N Rs.500 and some amount
according to his needs." It is not a valid cheque.
6. Payable to .arer or Order
The drawer of a cheque can make it payable to the bearer or
any specified person. If the customer marks cheque "Pay cash or order"
the bank may treat it valid and payable to bearer.
EXAMPLES
A draws a cheque as under:
a. "Pay M Rs. 500."It is a valid cheque.
b. "Pay N or bearer Rs. 500." It is a valid cheque.
SPEC MEN OF A CH EQUE
Cheaue No.:5755433 Date:Q2,Qa,2Ql
Q '
HABIB BANK LIMITED Account
New University Campus Br., Lahore No.
Pay Amiad 13133 8
RUnA88 Thirtv Thousand only -
Ra. I 30. 000I= I
Sionature

.........
DIFFERENCE B 1VOEN CHEQUE AND Bill OF DCHANGE
Following are the points of difference between the cheque and blH.

1. ee
c.. ....
Draw
A cheque is always drawn on a bank, A bill of exchange is drawa on a
person,and a bank
a. P.,a....-Demllncl
A cheque is drawn payable on demand A bill of exchange i.drawn
payable on
demand or on the expiry of a
certain period or sight.
Negotiablelnatrument . 199
a crossing, and the cheque shall be deemed 10 be Cf088ed apecially and
10 be crossed that bank. Thus, where a cheque Is crossed specially the
bank on whom it 1s drawn shall not pay it oth8fWiae than to the bank to whom
It is crossed or his
agent for collection. The specialcrossing can be made as follows:(Sec. 124) •

1 2

3 4
Account P•r•• Cr11• "1
In this type of CfOl ing the words 'account payee' or 'payee's account
only' or 'Ale payee' Is added to the general or apeolal crol81ng. It
haa the following effects.(Sec. 123 (A))
1. It becomas non-transferable.
2. It becomes the duty ot the collecting bank to credit the proc1eda of the
cheque only to the account of the payee named in the cheque.
Not Ne9otl8lltle C,...l"I
A cheque marked with the words 'not negotiable' can be tranaferred
by payee. The transferee will get the same rights, as regards payment, aa
the transferor had. But the transferee will not get the rights of a holder in
due COUl'M.
A person taking a cheque croeaed generally or specially, bearing in
either case the words 'not negotiable', sh8I not have, and ahall not be
capable of giving, a better title to the cheque than that which the person
from whom he took it had.(Sec.130)
The object of ·not negotiable' CI088ing la to provide protection to
the holder 01 drawer of a cheque because even if such cheque goM to wrong
hands ti1e true owner willnot loM his claim.
Who M•r Cross •Cheque?
The following may cross a cheque:(Sec.125)
1. Where a cheque is uncroued,the holder may croea it generally or
1P9Cially.
2. Where a cheque la cro11ed generally, the holder may croes It specially.
188 __ _ N_e,g,.otlabte
Instrument
Essentials
The following are essentials of promissory note:
1. In Writing
A promissory note must be in writing. A verbal promise to pay is
not a promissory note. The writing may be on any paper or book. It may
be written in pen or pencil. It may be printed or typed.
EXAMPLES
A signs the instruments in the following terms:
a. Ipromise to pay B or order Rs. 500.
b. Iacknowledge myself to be indebted to 8 in Rs. 1,000, to be
paid on demand,for value received.
The above instruments are valid promissory notes.
2. Promise to Pay
There must be a promise or undertaking to pay. A mere
acknowledgement of debt without a clear promise to pay is not a
promissory note.
EXAMPLES
A signs the instruments in the following terms:
a. Iam liable to pay to B, Rs. 500.
b. Ihave taken from B, Rs.500 and Iam accountable to him for the same
with interest.
c. Mr.X, 1.0.U. (Iowe you) Rs. 2000.
The above instruments are not valid notes.
3. Uncondltlonal Promise
It must contain unconditional promise to pay. The promise must
not depend upon the happening of some uncertain event. It must be
absolute. If it contains a conditional promise, It Is not a valid promissory
note.
EXAMPLES
A signs the instruments in the following terms:
a. Ipromise to pay 8 Rs. 500 seven days after my marriage with C.
b. Ipromise to pay B Rs.7000 as soon as Ican.
c. I promise to pay B Rs.500 on D's death provided D leaves me enough
to pay that sum.
The above instruments are not valid notes.

•
•
198 Negotiable
Instrument
2. Crossed Cheque
It is not payable at the counter. Its payment Is made only
through the collecting bank of a customer. The collecting bank credits
the proceeds of the cheque to the account of the payee. The crossing
provides protection to the holder of the cheque.

Crossing of a Cheque
•-nlng
A cheque is said to be crossed when two parattel transverse lines
are drawn on the left upper corner of the cheque.
PurpoH
The purpose of the crossing is to give a direction to the bank not
to pay the cheque across the counter but to pay it only to a bank.
Types
There are two types of crossing:
1. General Crossing
Where a cheque bears across its face an addition of the words
"and company• or any abbreviation thereof, between the two parallel
transverse lines, or of two parallel transverse lines simply, either with or
without the words "not negotiable," that addition shall be deemed a
crossing, and the cheque shall be deemed to be crossed generally. (Sec.
123)
Where a cheque is crossed generally, the bank on whom It is
drawn shall not pay it otherwise than to the bank. A generalcrossing
can be made as follows: (Sec.126)

1 2 3

'

4
2. Bpeclal Crossing
Where a cheque bears across Its face an addition of the name of a
bank, either with or without the words "not negotiable" that an addition
shall be deemed
- Negotiable Instrument
4. Signed by Maker
189

It is necessary that the maker must sign the promissory note.

The signature may be In any part of the instrument and not necessarily at
the bottom. When the maker is illiterate, his thumb impression is sufficient.
EXAMPLE
A writes the instrument but does not sign thereon: "Ipromise to pay B
Rs.
5,000." The note is not a valid promissory note.
5. Certain Maker
The instrument must indicate who is liable to pay. When there are
more than one makers, they may be liable jointly or jointly and
individually. But alternative promisors are not allowed.
EXAMPLES
a. A note in the form "Ipromise to pay to X Rs. 10,000" and signed by M or
also N is not a valid note.
b. A note in the form "I,X, promise to pay to Z Rs. 500" and signed by X or
blso Y is a good note as against X only
6. Certain Payee
The payee of a promissory note must be a certain person. The
payee's name can be indicated by his official designation. It may be made
payable to two or more payees jointly. It can be made payable in the
alternative to one of the two, or some of several payees. (Sec 13(2))
EXAMPLES
a. A promissory note payable to the manager of bank or the principal
of a college is regarded as payable to a certain person.
b. A signs the note as "Ipromise to pay a sum of Rs. 5000 to X or y• Is a
valid note because payee is considered a certain person.
7. Certain Sum
It is necessary that the sum of money promised to be payable
must be certain and definite. If the amount to be paid Is uncertain, the
instruments will be not be a valld promissory note.
EXAMPLE
A note in the form·1 promise to pay B Rs. 500 and all f ines
according to rules" is not a valid promissory note. •
8. Pakistani Currency
A promissory note containing a promise to pay a certain amount 1n
foreign currency is not a valid promissory note. For a valid note, it must
contain a promise to pay a certain amount In Pakistanicurrency.