Negotiable Instruments Act, 1881

Introduction,
meaning,
requirements
characteristics of negotiable instruments,
Definition and Distinction of Promissory notes, Bill of Exchange and cheque.
Crossing – object and kinds,
A brief introduction of endorsement,
Negotiation,
presentment,
Acceptance and
Dishonor.
Discharge from liability.

Introduction
A negotiable instrument is a piece of paper that guarantees the payment of
a certain sum of money, either immediately upon demand or at any
predetermined period, and whose payer is typically identified. It is a
document that is envisioned by or made up of a contract that guarantees
the unconditional payment of money and may be paid now or at a later
time. Promissory notes, bills of exchange, and cheques are the
three types of instruments covered by the Negotiable Instruments Act of
1881
The Negotiable Instruments Act of 1881 came into force on 1st March 1881

All you need to know about negotiable instrument

The word “instrument” refers to a written document by virtue of which a
right is created in favour of some individual. The word “negotiable”
indicates transferable from one person to another in exchange for payment.
Therefore, any document that confers ownership over a quantity of money
and that can be transferred (like currency) by delivery is considered to be a
“negotiable instrument.” Consequently, a document that can be delivered is
a negotiable instrument. The Negotiable Instruments Act of 1881 does not
define the phrase “negotiable instrument” as such; at most, Section 13 of
that legislation indicates that “negotiable instrument” refers to a
promissory note, bill of exchange, or cheque payable to order or to the
bearer.
The main distinction between a negotiable instrument and other
documents (or a chattel) is that, in the case of a negotiable instrument, the
transferee acquires a good title in good faith and for consideration even
though the transferor’s title may have a flaw; in contrast, in the case of
other documents, the transferee receives a similar title (or, to put it another
way, no better title) than the transferor.
Common traits/characteristics of negotiable instruments

 Negotiable instruments are transferable by nature: A

negotiable instrument may be freely transferred as many times as
necessary until it reaches maturity. Delivering the instrument is
sufficient if it is “payable to the bearer.” However, if it is “payable to
order,” it is accepted upon delivery and endorsement. In addition to
becoming entitled to the money transferred with a negotiable
instrument, the transferee also gains the ability to transfer the
instrument again
 2 .Having an independent title: When it comes to negotiable
instruments, the usual rule that states that no one can grant a
superior title than he or she possesses does not apply. If the
transferor had gained a negotiable instrument by fraud but the
transferee had acquired it in good faith (bona fide) for value, the
transferee would have a good title with regard to that instrument.
As a result, the title of the transferee in relation to a negotiable
instrument is separate from the title of the transferor. Additionally,
in circumstances involving negotiable instruments, the principle
of nemo dat quod non habet, according to which no one can grant a
higher title than he himself has, does not apply 3.Application of
presumptions: All negotiable instruments are subject to certain
presumptions, such as those outlined in Sections 118 and 119 of the
Negotiable Instruments Act of 1881.
 4Having the right to sue: A negotiable instrument’s transferee
(payee) is not required to notify the party (drawer) responsible for
making or honouring the payment under the negotiable instrument
 of the transfer. In the event of dishonour, the transferee may bring
a claim against a negotiable instrument in its own name without
notifying the original debtor of the transfer, i.e., without telling the
original debtor that the transferee has taken possession of the
negotiable instrument.
 Being certain: A carrier with no bags is a negotiable instrument. A
negotiable instrument must be written in the fewest number of words
possible and in such a way as to make the contract as clear-cut and
certain as possible. A negotiable instrument needs to be devoid of any
constraints that would significantly hinder its circulation. A
negotiable instrument must also include the payment of a specific
(fixed or defined) amount of money (money only and on a specific
time period).

Key features of negotiable instruments in the Negotiable

Instruments Act of 1881 
Promissory Note (Section 4 of the Negotiable Instruments Act,
1881)

1. Regardless of whether it is negotiable or not, an instrument that

complies with the definition in Section 4 of the Negotiable
Instruments Act, of 1881 must be regarded as a promissory note.
2. According to Section 4 of the Negotiable Instruments Act of 1881, a
written instrument (not a banknote or currency note) that contains
an unconditional undertaking, signed by the maker with the
promisor with the promise to pay a specific amount of money only
to, or at the direction of, a specific person, or to the bearer of the
instrument, qualifies as a negotiable instrument.
3. It must be signed, sealed, and written down;
4. There must be a commitment or undertaking to pay; The mere
admission of debt is insufficient;
5. There must be no conditions;
6. It must include a commitment to pay just money;
7. A promissory note’s maker and payee, or its parties, must be
certain;
8. It is repayable immediately or following a specific date; and
9. The amount owing must be certain.
Bill of Exchange (Section 5 of the Negotiable Instruments Act, 1881)

1. As per Section 5, a bill of exchange involves three parties: the

drawer, the drawee, and the payee;
2. It must be in writing, suitably stamped, and duly accepted by its
drawee;
3. There must be a payment order;
4. Unconditional promise or order to pay is required; and
5. Both the sum and the parties must be agreed upon and must be
certain.

Cheque (Section 6 of the Negotiable Instruments Act, 1881)

1. A cheque involves three parties: the drawer, the drawee bank, and

the payee;
2. It must be in writing and has the drawer’s signature;
3. Payee is confident;
4. The payment is always due upon demand;
5. It must contain a date in order for the bank to honour it; otherwise,
it is invalid;
6. The sum must be expressly stated, both verbally and numerically. If
the amount undertaken or ordered to be paid is stated differently in
figures and in words, the amount stated in words shall be the
amount undertaken or ordered to be paid, according to Section
18 of the Negotiable Instruments Act, 1881;
7. When a cheque is truncated, it is scanned, an electronic image of
the cheque is created, and instead of a physical cheque being
communicated in a clearing cycle, the image is instantly used to
replace any further physical movement of the cheque; and
8. No one other than the Reserve Bank of India or the Central
Government may draw, accept, make, or issue any Bill of Exchange
or Promissory Note payable to bearer on demand, according
to Section 31 of the Reserve Bank of India Act, 1934 (RBI Act,
1934). Despite the provisions of the Negotiable Instruments Act of
1881, Section 31(2) of the RBI Act of 1934 stipulates the same. 
9. A cheque is a bill of exchange written by the owner of an account
payable on demand to a bank.
10. A post-dated cheque becomes a cheque under Section 138 of the
Negotiable Instruments Act of 1881 on the date specified on the face
of the cheque, and the 6-month term must be calculated from that
 date for purposes of Proviso (a) of Section 138 of the Negotiable
Instruments Act of 1881. 
11. The cheque is not made payable in any other way than on demand
just because the payment date for it has been moved to a later date.
12.Legal action may be brought against the banker (the drawee in the
case of a cheque) if it honours the cheque before the date stated on
the cheque’s face.
13.When a cheque is described as “payable on demand,” the payee of the
cheque is referring to “payable at once.”

Cheque and post-dated cheque

The Hon’ble Supreme Court of India explained the distinction between a
cheque and a post-dated cheque with reference to Sections 5 and 6 of the
Negotiable Instruments Act, 1881, in the case of Anil Kumar Sawhney v.
Gulshan Rai (1993). According to the Supreme Court’s ruling:

1. A post-dated cheque is only a bill of exchange when it is written or

drawn; after it is due on demand, it is a cheque.
2. A post-dated cheque is not cashable before the date printed on the
document’s face. It remains a bill of exchange under Section 5 of the
Negotiable Instruments Act of 1881 until the date indicated on it, at
which point it becomes a cheque.
3. Since a post-dated cheque cannot be presented to the bank, the
issue of its return would not come up. The requirements of Section
138 of the Negotiable Instruments Act, 1881 only apply when the
post-dated cheque becomes a “cheque” with effect from the date
indicated on the face of the said cheque.
4. A postdated cheque is nevertheless valid as a bill of exchange until
the date printed on it. However, as of the date printed on the face of
the said cheque, it qualifies as a cheque under the Negotiable
Instruments Act of 1881, and in the event that it is dishonoured,
Section 138’s proviso (a) is triggered.

Different types of cheques 

The various types of cheques have been discussed hereunder:

1. Open cheque: With such a cheque, it is possible to obtain cash

from the bank’s counter;
2. Bearer Cheque: It is somewhat comparable to an open cheque in
that any person carrying or bearing the bearer cheque may be paid
the amount specified in the cheque.
 3. Crossed  Cheque: A crossed cheque, which would only be
credited into the payee’s bank account, can be used to reduce the
risk associated with open cheques, which are often risky to write
and issue. The top left corner of a cheque can be crossed by drawing
two parallel lines across it, with or without writing “Account Payee”
or “Not Negotiable.”
4. Order Cheque: It is a cheque that can have the word “word
bearer” cut or cancelled and is made out to a specific person;
5. Electronic Cheque: It is a cheque that is generated in a secure
system, ensuring safety requirements through the use of digital
signatures, and it contains an exact mirror image of the original
cheque.

Difference between promissory note and bill-of-exchange 

1. A bill of exchange contains an unconditional order to pay, but a

promissory note contains an unconditional promise to pay.
2. There are only two parties in a promissory note, the maker and the
payee, whereas there are three parties in a bill of exchange, namely,
the drawer, the drawee, and the payee.
3. In a promissory note, acceptance is not necessary; in a bill of
exchange, however, the drawee must accept.
4. In a bill of exchange, the obligation of the drawer is secondary and
contingent upon the drawee’s failure to pay; in a promissory note,
the liability of the drawer or the note’s manufacturer is main and
absolute.

Difference between cheque and bill-of-exchange

1. A bill of exchange can be drawn on anyone, including a banker,

unlike a cheque, which is drawn on a banker.
2. According to Section 19 of the Negotiable Instruments Act of 1881, a
cheque is always payable immediately; a bill of exchange, however,
is either payable immediately or after a certain amount of time.
3. One can cross a cheque to make it non-negotiable, but one cannot
cross a bill of exchange.
4. Acceptance is not necessary for a cheque, but it is necessary for a
bill of exchange.
Difference between holder and holder in due course

1. Any individual with the legal right to possess a promissory note, bill
of exchange, or cheque in his or her own name, as well as to receive
or obtain payment from the parties thereto, is referred to as the
“holder” of that instrument. A holder who accepts the instrument in
good faith, with due care and prudence, for value (consideration),
and before maturity is referred to as a “holder in due course.” In the
event of a “holder,” payment is not essential, and they are also
permitted to purchase the instrument after it reaches maturity.
2. A “holder” does not have any particular rights, but a “holder in due
course” does have some specific rights. For instance, a holder in due
course cannot use the argument that the amount they filled out on
an instrument exceeded the authority granted. It was decided that
an endorsement was irregular and that the endorsee (AB and Co.)
was not a holder in due course, albeit it might be a holder for value,
when a bill was prepared by X in favour of Z and Z further endorsed
the bill in favour of AB and Co.
3. The key point is that the holder must have legal custody of the
instrument in his own name. The possessor must be entitled to
obtain or recoup that sum. An endorsee, payee, or bearer are all
examples of holders. If someone has entitlement, it indicates that
even if they don’t use it, they are still entitled to it and it cannot be
taken away from them. In accordance with Section 8 of the
Negotiable Instruments Act of 1881, the holder of an instrument
must have a right to the instrument even if he does not possess it.
4. A “holder” does not receive a title superior to that of his transferor;
rather, a “holder in due process” receives a title superior to that of
his transferor. The status of a “holder” is less favourable than that
of a “holder in due course. ” The title of a “holder in due course”
becomes free from all equities, meaning that a “holder in due
course” cannot raise the defence that can be raised against the prior
parties. For instance, if a negotiable instrument is lost and then
found by someone through criminal activity (theft), the person who
received the instrument through criminal activity is not entitled to
any rights regarding any money owed in relation to that instrument.
However, if such a document is properly transferred to a person as
a holder, he will get a good title.
Holder in due course
A person who has obtained a negotiable instrument in conformity with
good faith and for value is referred to as a “holder in due process.” Each
negotiable instrument holder is considered to be a “holder in due course.” It
is the responsibility of a party liable for repayment to prove that the person
holding the negotiable instrument isn’t the rightful owner in the event of a
dispute. 
In any case, the onus is on the holder to prove that he is a holder in due
course, for instance by proving that he obtained the negotiable instrument
in accordance with some good faith and for value, if the parties obligated
for repayment demonstrate that the negotiable instrument was obtained
from its legitimate proprietor by means of a crime or extortion. In law, the
“burden of proof” is the requirement to establish specific facts.
Fact of dishonour 
Dishonor occurs when a negotiable instrument is not paid or accepted when
presented for payment or acceptance. It can be due to various reasons, such as
insufficient funds, material alteration, or lack of authority. When a negotiable
instrument is dishonored, the holder can take legal action against the party liable
to pay.
A negotiable instrument may occasionally be dishonoured, which means
the party responsible for payment neglects to make the payment. After
submitting the proper notice of dishonour, the holder has the right to file a
lawsuit for the recovery of the sum. However, he is allowed to have a Notary
Public’s certification about the actuality of dishonour before he files the
lawsuit. A statement like that is referred to as “protest.” The court will
assume that there has been dishonour based on the verification of such a
dissent. 
Presumption as to service of notice 
It is assumed that a notice has been served if it has been sent by registered
mail to the right address of the cheque’s drawer. The drawer, however, has
the right to refute this assumption.
The Apex Court has ruled that a notice is considered to have been properly
served if it is delivered to the correct address and returned with the words
“refused,” “no one was home,” “house was locked,” or words to that effect.
Inchoate instruments
The rules pertaining to an inchoately stamped instrument were outlined
in Section 20 of the 1881 Act. According to the mentioned Section, only two
types of instruments, a promissory note and a bill of exchange are stamped
in the Act, which makes it clear which ones they are. The problem is that,
regardless of the fact that a cheque is not a stamped document or that there
are numerous differences between the documents recognised by Section 20
of the Act and a cheque, many judicial pronouncements (e.g., Magnum
Aviation (Pvt.) Ltd. v. State and Ors (2010)) recognise or regard a cheque
as an inchoate instrument if it lacks one or two essentials listed in the
characteristics of the negotiable instrument.
Requirement of stamp

7. Despite the fact that the Act makes no reference of the stamp’s
relevance or requirement, every style of promissory note and bill of
exchange must have a stamp on it. The Indian Stamp Act of
1899 mentions a mandatory provision for stamp affixation on such
documents.

Liabilities under the Negotiable Instruments Act 1881

The various liabilities that are provided in the Act of 1881 have been laid
out hereunder:

 Liability of agent signing (Section 28): A promissory note, bill

of exchange, or cheque that an agent signs without specifying that
he is acting as an agent or that he does not intend to assume
personal liability makes the agent personally liable for the
instrument, with the exception of those who persuaded him to sign
under the impression that only the principal would be held
responsible.
 Liability of legal representative signing (Section 29): A
promissory note, bill of exchange, or cheque that a legal
representative of a deceased person signs binds him personally
unless he expressly restricts his duty to the amount of assets he
received in that capacity.

 Liability of drawer (Section 30): If the drawee or acceptor of a

bill of exchange or cheque dishonoured it, the drawer is obligated to
pay the holder compensation, provided that the drawer has received
 or been given the proper notice of the dishonour as described
further below
 .Liability of drawee of cheque (Section 31): The drawee of a
cheque must pay the cheque when required to do so and, in the
event that payment is not made as required, must reimburse the
drawer for any losses or damages resulting from the default. This is
true even if the drawee has sufficient funds in his possession that
are legally applicable to the payment of the cheque.
 Liability of maker of note and acceptor of bill (Section
32): The maker of a promissory note and the acceptor of a bill of
exchange prior to maturity are obligated to pay the amount due at
maturity in accordance with the apparent tenor of the note or
acceptance, respectively, in the absence of a contract to the contrary,
and the acceptor of a bill of exchange at or after maturity is obligated
to pay the amount due to the holder upon demand. Any party to the
note or bill who is not paid as required by the note or bill must be
reimbursed by the maker or acceptor for any losses or damages they
suffer as a result of the default.

 Liability of indorser (Section 35): Without a contract to the

contrary, whoever indorses and delivers a negotiable instrument
before maturity without, in such indorsement, expressly excluding
or making conditional his own liability, is bound by such
indorsement to every subsequent holder, in case of dishonour by
the drawee, acceptor, or maker, to compensate such holder for any
loss or damage caused to him by such dishonour. Every indorser
who does dishonour is accountable as if they were a demand-
payable instrument.Section 40 talks about the discharge of the
indorser’s liability. The indorser is released from responsibility to
the holder to the same extent as if the instrument had been paid in
full when the holder of a negotiable instrument destroys or weakens
the indorser’s remedy against a preceding party without the
indorser’s consent. 
 Liability of prior parties to holder in due course (Section
36): Every prior party to a negotiable instrument is liable thereon to
a holder in due course until the instrument is duly satisfied.
Presumptions under Section 118 and Section 119 of the Negotiable
Instruments Act, 1881
According to Section 101 of the Indian Evidence Act, 1872, the plaintiff has
the initial burden of proving a prima facie case in his favour. Once the
plaintiff presents evidence to support a prima facie case in his favour, the
defendant is then required to present evidence to the court of law that
supports the plaintiff’s case. The burden of proof may return to the plaintiff
as the case develops. The following presumptions shall be made unless the
contrary is shown, according to Section 118 of the Negotiable Instruments
Act of 1881:

1. Consideration: When dealing with a negotiable instrument, the

complaint must establish prima facie that he did so in good faith
and without payment. Every negotiable document is deemed to
have been drawn for consideration, and every time one of these
instruments is accepted, inscribed, or transferred, it is assumed that
this was done for (or against) consideration. As a result, in the event
that the complainant files a complaint alleging dishonour of a
cheque (or other negotiable instruments), the accused person may
discharge his or her responsibility by demonstrating that there is no
sum due to be paid to the complainant by the accused person under
the terms of the instrument.
2. Date: It is assumed that a negotiable instrument was drawn on the
date that is specified on the instrument’s face in the case of a
negotiable instrument.
3. Time of acceptance: When it comes to negotiable instruments, it is
assumed that they were accepted within a reasonable amount of
time following their execution date and prior to their maturity.
4. Time of transfer: Every transfer involving a negotiable instrument
is assumed to have taken place before the instrument’s maturity
date.
5. Order of indorsements: The endorsements that appear on a
negotiable instrument are assumed to have been made in the order
or sequence that they do.
 6. Holder in Due Course: A missing promissory note, bill of exchange,
or cheque is assumed to have been properly marked, thereby,
implying the concept of holder in due course.
7. Stamp: Every possessor of a negotiable instrument is deemed to
have obtained it voluntarily and in exchange for value. The accused
party must demonstrate that the negotiable instrument’s holder is
not a holder in good standing.

The Negotiable Instruments Act of 1881 mandates that when a promissory

note or bill of exchange has been dishonoured by non-acceptance or non-
payment, the holder of such instrument may cause such dishonour to be
noted by a notary public upon the instrument or upon a paper annexed (or
attached) thereto, or partly upon each of them, i.e., the instrument and the
paper annexed to the instrument. Additionally, according to Section 100 of
the Negotiable Instruments Act of 1881, the holder of an instrument may
have it protested by a notary public within a reasonable amount of time
regarding the dishonour of the instrument.
The penal provisions of the Negotiable Instruments Act, 1881
The criminal penalties found in Sections 138 to 142 of the 1881 Act have
been put in place to make sure that contracts entered into using cheques as
a form of deferred payment are upheld. Conditions for filing a complaint for
cheque dishonour are outlined in Section 138 of the Act. The following are
the components needed to comply with Section 138:

1. Cheques are a common form of payment, and post-dated cheques are

regularly utilised in a variety of business operations. Cheques that
have been postdated are issued to the cheque’s drawer as a
convenience. As a result, it becomes important to make sure the
cheque’s drawer isn’t abusing the accommodations made for him. 
2. The Negotiable Instruments Act, 1881 governs the use of negotiable
instruments, including cheques, bills of exchange, and promissory
notes. The purpose of Chapter XVII, which contains Sections 138 to
142, was to foster trust in the effectiveness of banking operations
and lend legitimacy to the negotiable instruments used in
commercial transactions.
3. A person must have drawn a cheque to pay money to someone else to
satisfy any debt or other obligation;
4. The bank has received that cheque during the last three months;
 5. When a cheque is returned unpaid by the bank due to inadequate
funds or because it exceeds the amount specified in an agreement
established with the bank to be paid from that account;
6. Within 15 days of learning from the bank that the cheque was
returned as unpaid, the payee issues a written notice to the drawer
demanding payment of the money;
7. Within 15 days of receiving the notice, the drawer fails to pay the
payee. 

An overview of Section 138 of the Negotiable Instruments Act, 1881

The “Negotiable Instruments Act” was first developed in 1866, and it was
finally passed into law in 1881. Chapter XVII, which includes sections 138
to 142, was added to this statute in 1988, after than a century. Section 138
of the Act essentially lays out the punishment for the crime of dishonouring
a cheque. “A negotiable document drawn on a designated banker and not
expressed to be payable otherwise on demand” is how one may define a
cheque under the Section. The word “cheque” is defined in Section 6 of
Chapter 2 of the Negotiable Instruments Act, 1881 to include “an electronic
image of a truncated cheque and a cheque in electronic form.” Before the
recent addition, criminal prosecution of the accused in cases of cheque
dishonour was not an option for the payee of the cheque; instead, only civil
and alternative dispute resolution procedures were available. Now, the
payee of the cheque has access to both civil and criminal remedies.

The Hon’ble Court stated in Modi Cement Limited v. Kuchil Kumar

Nandi (1998), that the major goal of Section 138 of the Negotiable
Instrument Act, 1881 is to increase the effectiveness of banking operations
and to guarantee complete trust while conducting business using cheques.
The laws of the commercial world, which are specifically designed to
simplify trade and commerce by making provisions for giving sanctity to
the instruments of credit that would be deemed to be convertible into
money and easily transferable from one to another, are those that deal with
negotiable instruments.

In the most recent decision of P Mohanraj vs. M/S. Shah Brothers Ispat
Pvt. Ltd. (2021), a division bench composed of Rohinton Fali Nariman, and
B.R. Gavai rendered their decision that when discussing whether Section
14 of the Insolvency and Bankruptcy Code, 2016 prohibits proceedings
under Section 138 of the Negotiable Instrument Act, 1881, against
corporate debtors, it was noted that the proceedings under Section 138
could be described as “civil sheep” in “criminal wolf’s clothing.”

Conclusion 
According to the 213th Law Commission Report, the Indian judicial system
is dealing with a significant backlog of cases, and roughly 20% of the
litigation-related issues include cheque bounces. The lifeless sections of the
Negotiable Instruments Act of 1881 would thus be given some life by the
recently enacted provisions. Even though cases involving cheque bounces
are penal in nature and result in criminal offences, the procedures for
summary judgement are still on the books, and making the offence subject
to bail has made these cases practically identical to civil issues. In this
approach, newly introduced restrictions would in fact be a proactive
measure to protect the legitimacy of cheques. Once the accused individuals
or the appellant, if there is an appeal, deposit a sizable sum, they will begin
to treat the situation seriously. Even while it is moving in the right way,
there is still work to be done to make cheque bounce cases feasible, and
summary trials must be given their actual meaning. Otherwise, the entire
point of making cheque bounce a criminal offence would become less
significant.

Crossing and its types

Crossing is a process in which a negotiable instrument, such as a cheque, is

marked with two parallel lines, either across the face or on the back of the
instrument. The purpose of crossing is to indicate that the instrument can
only be paid into a bank account and not cashed directly. The crossing is
intended to provide a measure of security against fraud, as it ensures that
the payment is made to the intended person and helps prevent
unauthorized persons from cashing the cheque.

There are two types of crossing:

1. General Crossing: A general crossing is made by drawing two parallel

lines across the face of the cheque, without any words in between. A
cheque that is generally crossed can only be paid into a bank account
and cannot be cashed directly.
 2. Special Crossing: A special crossing is made by drawing two parallel
lines across the face of the cheque, along with the name of a particular
bank between the lines. A cheque that is specially crossed can only be
paid into the account of the specified bank and not any other bank.

Crossing can be done by the drawer of the cheque or by the holder of the
cheque. Crossing is not a legal requirement, but it is a common practice to
add this security measure to negotiable instruments to ensure safe and
secure transactions.

Account Payee Crossing In this type of crossing the words 'account payee' or
'payee's account only' or 'Ale payee' is added to the general or special crossing. It
has the following effects. (Sec. 123 (A))

1. It becomes non-transferable.
2. . It becomes the duty of the collecting bank to credit the proceeds of the
cheque only to the account of the payee named in the cheque.
Not Negotiable Crossing A cheque marked with the words 'not negotiable'
can be transferred by payee. The transferee will get the same rights, as
regards payment, as the transferor had. But the transferee will not get the
rights of a holder in due course. A person taking a cheque crossed generally or
specially, bearing tn either case the words · not negotiable', shall not have,
and shall 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'
crossing is to provide protection to the holder o, drawer of a cheque because
even if such cheque goes to wrong hands ti1e true owner will not lose his
claim.

PRESENTMENT OF NEGOTIABLE INSTRUMENT

Presentment means presenting a negotiable instrument for acceptance, sight or

payment before acceptor, maker, drawee or other party liable thereon by the
holder. There are three kinds of presentment.

1 . Presentment for Acceptance

2. Presentment for Sight

3. Presentment for Payment

PRESENTMENT FOR ACCEPTANCE Presentment for acceptance is necessary only

in case of bill of exchange. It does not apply to a cheque or a promisory note. The
following bills need not be presented for acceptance:

1. A bill payable on demand.

2. A bill payable on the expiry of certain period after date.

3. A bill payable on the date of happening of a certain event.

However, the following bills must be presented for acceptance:

1 . A bill payable at a specified period 'after sight' must be presented to the

drawee for sight or acceptance to fix the maturity date of the bill.

2.A bill in which there is an express stipulation that it shall be presented for
acceptance before presentment for payment. (Sec. 61)

Acceptance means acknowledgment of the sum mentioned in a bill by the

drawee or any other person on his behalf. The drawee is not liable on the bill
unless the bill is presented to him for acceptance and he actually accepts it. The
drawee gives his consent in writing to the bill by signing it. He writes the word
'accepted' and delivers back to the holder. Essentials of valid Acceptance

Essentials of valid Acceptance

following are essentials of a valid acceptance:

1. It must be in writing.

2. It must be signed by the drawee or his agent.

3. It must appear on the bill.

4. The accepted bill must be delivered to the holder.

Types of Acceptance
The following are two types of acceptance:

1. General Acceptance When the drawee accepts the liability to pay the amount
mentioned in the bill in full without any condition, the acceptance is called
general or absolute The acceptor may mention the bank where payment shall be
made and it does not amount to condition.

2. Qualified Acceptance When the drawee accepts the bill subject to some
condition, it is called conditional or qualified acceptance. For example,
acceptance for an amount less than that mentioned in the bill or for a longer
period than that specified in the bill is conditional acceptance. The holder may
refuse to take a qualified acceptance and treat the bill as dishonoured and sue
the drawer. The holder may accept the qualified acceptance. If he accepts such
qualified acceptance, without the consent of the prior parties. the prior parties
are discharged from their liability. (Sec. 1 31 -1

Who May Present

Any one of the following can present the bill for acceptance:

1. The holder himself.

2. The authorized agent of holder.

3. The endorsee in case of endorsement.

Who May Accept

Any one of the following can accept the bill:

1. The drawee or his authorized agent

2. All the drawees where there are several drawees. authorized to accept, then
their acceptance is enough.

3. The legal representative in case the drawee is dead.

4. The official receiver in case the drawee has become insolvent.

5. The drawee in case of need if the original drawee refuses to accept.

6. An acceptor for honor i.e any person who accepts the bill for the honor of any
party liable on it.

Time of Presentment The rules for time of presentment for acceptance are: (Sec.
61)

1. It must be presented on a business day within business hours.

2. It must be presented within a reasonable time if no time is specified.

3. It must be presented within that period specified in the bill.

Place of Presentment If a particular place is specified in the bill, it must be

presented for acceptance at that place. If at such a place the drawee cannot be
found after reasonable search on the due date for presentment, the bill is
dishonoured. If no place is mentioned in the bill, it may be presented at the usual
place of business of the drawee or his residence. (Sec. 61)

Presentment for Acceptance Necessary

A bill of exchange in order to fix the acceptor with liability must be

presented for acceptance before it is presented for payment. (Sec.1 31-F)

Presentment for Acceptance Unnecessary

In the fo11owing cases, presentment for acceptance is unnecessary:

1 . When the drawee is dead or insolvent, the instrument may be presented to

the legal heirs or assignee.

2. When the drawee is a fictitious person.

3. When the drawee is incapable to contract.

4. When the drawee cannot be found after reasonable search.

5. When the presentment is irregular, acceptance has been refused on some

other ground. (Sec. 131-G)

Effect of Non-Presentment

When presentment for acceptance is necessary and the holder commits

default in making such presentment, all the parties thereon are discharged from

their liability to such holder. (Sec. 61)

PRESENTMENT FOR SIGHT

Presentment for sight Is necessary in case of note which Is made payable

at a certain period after sight to ascertain the maturity. The rules in this case are

as under: (Sec. 62)

1. The expression after sight on a note means that the payment cannot be

demanded till it is shown to the maker.

2. Where a note is made payable after sight, it is necessary to present it for

sight in order to fix its maturity.

3. If the maker is not found, after reasonable search, presentment is excused

and the instrument is treated as dishonored.

4. The presentment should be made during business hours on a business day.

5. In case of default in such presentation no party thereto is liable thereon to the

person making such default.

PRESENTMENT FOR PAYMENT

The promissory note, bill of exchange and cheque must be presented for

payment to the maker, acceptor or drawee respectively by or on behalf of the

holder. On default of such presentment the maker, acceptor or drawee, as the

case may be, is not liable to pay. The rules regarding presentment for payment

are as follows: (Sec. 64)

Presentment of Negotiable Instrument 217

1. Hours of Presentment

It must be presented for payment during usual hours of business and if

payable at a bank, during the usual banking hours. (Sec. 65)

2. Instruments payable after date or sight

A note or a bill of exchange made payable at a specified period after date

or sight thereof must be presented for payment at maturity. (Sec.66)

3. Promissory note payable by Installments

A promissory note payable by installments must be presented for

payment on the third day after the date fixed for payment of each installment. If

any installment is not paid on such presentment, it has same effect as non
payment of a note at maturity. (Sec. 67)

4. Place of Presentment

a. If a bill is made or accepted at a specified place, it must be presented at that

place for payment. (Sec. 68)

b. If a bill or note is drawn or accepted payable at a specified place, it must be

presented for payment at the place in order to charge the maker or drawer

thereof. (Sec. 69)

c. If the instrument does not indicate the place of payment, it must be presented

at the place of business (if any) or at the usual residence of the maker,
drawee or acceptor, as the case may be. (Sec. 70)

d. If the party liable for payment has no place of business or fixed residence or

no specified place for presentment, the presentment can be made to him In

person wherever he can be found. (Sec. 71 )

5. Presentment of Cheque

a. In order to charge the drawer, a cheque must be presented at the bank upon

which it is drawn before the relation between the drawer and his bank has

been altered to the prejudice of the drawer. (Sec.72)

b. A cheque must be presented within a reasonable time after its issue in orciv,

to charge any person except the drawer. (Sec. 73}

c. Where the holder does not present the cheque within a reasonable time and

the drawer suffers damage due to delay, the drawer will be discharged to the

extent of such damage. (Sec. 84)

6. Instrument payable on demand

A negotiable instrument payable on demand must be presented for

payment within a reasonable time after it is received by the holder. (Sec.74)

7. Agent, Legal representative or Assignee

Presentment for acceptance or payment may be made to the duly

authorized agent of the drawee, maker or acceptor, as the case may be. Where

the drawee, maker, or acceptor has died or has become insolvent, presentment

may be made to his legal representative or assignee as the case may be. (Sec.
75)

8. Excuse for delay In presentment

Delay in presentment for acceptance or payment is excused if the delay is

caused by circumstances beyond the control of the holder, and not imputable to

his default, misconduct or negligence. When the cause of delay ceases to

operate, presentment must be made within a reasonable time. (Sec. 75-A)

9. Right of Holder

When a bill of exchange is dishonoured by non-acceptance, an

immediate right of recourse against the drawer and endorser accrues to the

holder, and no presentment for payment is necessary (Sec. 1 31-H)

Presentment for Payment unnecessary

The presentment of a negotiable instrument for payment is not necessary

in the following cases and it is treated as dishonoured: (Sec. 76):

1. When the maker, drawee or the acceptor intentionally prevents the

presentment of the instrument.

2. When the instrument is payable at the payer's place of business and he

closes a place of business during the usual business hours.

3. When the instrument is payable at a specified place, the payer or his agent

do not attend such place during the usual business hours.

4. When the instrument is not payable at any specified place and the payer

cannot after due search be found.

5. When there is promise to pay notwithstanding non-presentment.

6. When the payer waives the presentment and promises to pay even though no

presentment is made.

7. When the drawer could not suffer damage for want of presentment.

8. When the bill is dishonoured by non-acceptance.

9. When the drawee is a fictitious person.

10. When the drawer and the drawee is the same person.

11. When it is impossible to present the instrument.

Payment for honour

1 13)

A payment is a payment for honour under the following conditions: (Sec.

1. The bill must be dishonored for non-payment.

2. The bill must be noted and protested for non-payment

3. The person paying or his agent must declare before the Notary Public the

party for whose honour he pays.

4. The declaration to pay must be recorded by the Notary Public.

5. The payment for honour must be made for the honor of any party liable to pay

on the bill

6. The payment for honour may be made by any person who is already not

liable on the bill.

Rights of Payer for honour

Any person making payment for honour is entitled to all the rights in

respect of the bill, of the holder at the time of such payment. He may recover

from the party for whose honour he pays alt sums so paid with interest thereon

and all expenses property incurred in making such payment. (Sec. 1 14)

NEGOTIATION OF NEGOTIABLE INSTRUMENT

Introduction Negotiation of an instrument is the process by which the ownership

of the instrument is transferred from one person to another. The holder of the
instrument does not wait for maturity but transfers it to his creditor to clear his
debts. A negotiable instrument may be transferred by

(1} negotiation or (2) assignment

1. Transfer by Negotiation When a promissory note, bill of exchange or cheque Is

transferred to any person, so as to constitute that person the holder thereof, the
instrument is said to be negotiated. As a result of negotiation, the holder will be
entitled to receive the amount and sue for recovery. Only handing over of the
Instrument to a servant for safe custody is not negotiation. It must be transferred
with the intention to pass title to the transferee. (Sec. 14) Modes of Negotiation
There are two ways of negotiating a negotiable instrument:

a. Negotiation by Delivery A negotiable instrument payable to bearer can only

be transferred by delivery. It does not require the signature of the transferor.
(Sec. 47)

b. Negotiation by Endorsement and Delivery A negotiable instrument payable

to order can be negotiated by the holder by endorsement and delivery. The
holder must sign his name on the instrument for the purpose of negotiatlor, and
deliver it to the transferee. (Sec. 48)

2. Transfer by Assignment The owner5hip of the Instrument may be transferred

by 'assignment' by written and regi&tered document in accordance with the
Transfer of Property Act.
DIFFERENCE BETWEEN NEGOTIATION AND ASSIGNMENT The points of
difference are stated below:

Negotiation Assignment

1. Formalities Negotiation requires Assignment requires a ·,"written

mere delivery of a bearer instrument document signed by the transferor
and endorsement and delivery of an irrespective whether the instrument is
order instrument. bearer or order

2. Notice of Transfer In negotiation a In assignment, a notice of transfer of

notice of transfer of debt is not debt is required to be given to the
required to be given to the debtor. debtor.

3. Title In negotiation the transferee In assignment, the assignee takes the

takes the negotiable instrument free
from all defects in the title of the
previous transferors.
4. Consideration Consideration is
always presumed in the case of
transfer by negotiation.
5. Sue In negotiation a transferee can
sue the party in his own name
instrument subject to the defects in
the title of transferor.
There is no such presumption in the
case of transfer by assignment.
In assignment an assignee cannot sue
the party in his own name

Who may Negotiate

Every maker, drawer, payee or endorsee, and where there are several makers,
drawers, payees, or endorsees, all of them jointly may negotiate an instrument,
provided the negotiability of such instrument has not been restricted by the
express words used In instrument. Only the lawful possessor can negotiate the
Instrument (Sec. 51.)

Duration of Negotlabililty The negotiable instruments can be negotiated by any

person until payment. However, the maker, drawee or acceptor can negotiate it
until maturity

ENDORSEMENT
ENDORSEMENT

Definition The process of transferring an instrument is called endorsement. An

endorsement means signing the negotiable instrument on the back or face
thereof or on a slip of paper (called allonge) annexed there to for the purpose of
negotiation. The person making the endorsement is called an endorser and the
person to whom the instrument is indorsed is called the endorsee Essentials of
Valid Endorsement Following are the essentials of valid endorsement:

1. It must be signed by the endorser.

2. It must be made by the maker or holder of the instrument.

3. It must be on the back or face of the instrument or on a slip of paper annexed

thereto, such a slip is called allonge.

4. It must be made in ink. An endorsement in pencil or by rubber stamp is invalid.

5. If the endorser is illiterate person, he may indorse the instrument by affixing his
thumb impression thereon.

6. In case of endorsement by affixing thumb impression, it should be attested by

somebody.

7. It must be made with the intention of transferring the instrument to a third

person to give him a right to recover money.

8. The intention must be clearly expressed thereon.

9. It must be completed by the delivery of the instrument.

Effect of Endorsement: When a negotiable instrument is indorsed and delivered

to the endorser, the ownership of the instrument and the right of further
negotiation passes to the endorsee. (Sec. 50)

Kinds of Endorsement: The endorsement may be of the following six kinds: -

1. Blank Endorsement When the endorser signs his name only and does not
specify the name of the endorsee, the endorsement is said to be in blank. This
makes the instrument transferable by delivery and it becomes payable to
bearer. It is also called general endorsement. (Sec. 16 & 5) EXAMPLE A bill is
payable to X. X signs and endorses it without mentioning the name of any
endorsee. It is a blank endorsement.

2. Full Endorsement If the endorser, in addition to his signature, also adds a

direction to pay the amount mentioned in the instrument to, or to the order of a
specified person, the endorsement is said to be in full or special endorsement
(Sec. 16) EXAMPLE B makes endorsement by writing the words, 'pay to A or order'
and signs it, it is a full endorsement.

3. Partial Endorsement A negotiable instrument cannot be indorsed for a part of

the amount due on the instrument. In other words, a partial endorsement, which
transfers the right to receive only a part payment of the amount due on the
instrument, is invalid. Where an instrument has been partly paid, it can be
negotiated for the balance provided the fact of part payment is noted on the
instruments.

a. A holds a bill for Rs. 5000 and endorses it in favour of B for Rs.2000 and in
favour of C for Rs. 3000 is partial and invalid.

b. The maker of a note for Rs. 1 0000 pays Rs. 7000 and the fact is noted on the
instruments. The holder can negotiate the note for the balance.

4. Restrictive Endorsement When endorser by express words prohibits the

endorsee from further negotiating the instrument or restricts the endorsee to
deal with the instrument as directed by the endorser is called restrictive
endorsement. (Sec. 50) EXAMPLE B the holder of the bill makes an endorsement
on the bill saying 'pay C only' it is a restrictive endorsement, as C cannot negotiate
the bill further.

5. Conditional Endorsement If the endorser of negotiable instrument by express

words in the endorsement, makes his liability dependent on the happening of a
specified event, although such event may never happen, such endorsement is
called a conditional endorsement (Sec. 52) In conditional endorsement the
liability of the endorser arises only upon the happening of the event specified. If
such event does not happen in specified time, the liability of endorser comes to
an end. The endorsee cannot claim payment from prior parties. He can claim
payment from the original party on maturity. EXAMPLE A, the holder of the bill,
makes an endorsement on the bill saying 'Pay B or order when 8 qualifies B. Com.

6. Sans Recourse Endorsement All parties to a negotiable instrument are liable to

the endorsee. However, when the endorser expressly excludes his own liability on
the negotiable instrument to the endorsee or any subsequent holder in case of
dishonor of the instrument, the endorsement is known as sans recourse
endorsement. (Sec. 52) EXAMPLES a. 'Pay X or order sans recourse.' b. 'Pay B or
order at his own risk.' 7. Facultative Endorsement When the endorser expressly
gives up some of his rights under the negotiable instrument, the endorsement is
called facultative endorsement.

7. Facultatlve Endorsement When the endorser expressly gives up some of his

rights under the negotiable instrument, the endorsement is called facultative
endorsement.

In this case the endorsee is relieved of his duty to give notice of his dishonour to
the endorser. The endorser remains liable to endorsee for non payment, even
though no notice of dishonour has been given to him

EXAMPLE 'Pay X or order, notice of dishonour waived' is a facultative

endorsement.

CHAPTER VII OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES

82. Discharge from liability.---The maker, acceptor or endorser respectively of a
negotiable instrument is discharged from liability thereon----

(a) by cancellation; to a holder thereof who cancels such acceptor's or endorser's

name with intent to discharge him, and to all parties claiming under such holder;
(b) by release; to a holder thereof who otherwise discharges such maker,
acceptor or endorser, and to all parties deriving title under such holder after
notice of such discharge; and
(c) to all parties thereto, if the instrument is payable to bearer, or has been
endorsed in blank, and such maker, acceptor or endorser makes payment in due
course of the amount due thereon.

83. Discharge by allowing drawee more than forty-eight hours to accept. ---

If the holder of a bill of exchange allows the drawee more than forty eight hours,
exclusive of public holidays, to consider whether - he will accept the same, all
previous parties not consenting to such allowance are thereby discharged from
liability to such holder. 84. When cheque not duly presented and drawer
damaged thereby.---

(1) Where a cheques is not presented for payment within a reasonable time of its
issue, and he drawer or person on whose account it is drawn had the right, at the
time when presentment ought to have been made, as between himself and the
banker, to have the cheque paid and suffers actual damage through the delay, he
is discharged the extent of such damage, that is to say, to the extent to which
such drawer or person is a creditor of the banker to a larger amount than he
would have been if such cheque had been paid.

(2) In determining what is a reasonable time, regard shall be had to the nature of
the instrument, the usage of trade and of bankers, and the facts of the particular
case.

(3) The holder of the cheque as to which such drawer or person is so discharged
shall be a creditor, in lieu of such drawer or person, of such banker to the extent
of such discharge and entitled to recover the amount from him. Illustrations

(a) A draws a cheque for Rs. 1,000 and when the cheque ought to be presented,
has funds at the bank to meet it. The bank fails before the cheque is presented.
The drawer is discharged, but the holder can prove against the bank for the
amount of the cheque.

(b) A draws a cheque at Sialkot on a Bank in Karachi. The Bank fails before the
cheque could be presented in ordinary course. A is not discharged, for he has not
suffered actual damage through any delay in presenting the cheque. Substituted
for the original section by the Negotiable Instruments (Amendment) Act, 1897 (VI
of 1897), S. 3. 85. Cheque payable to order.

(1) Where a cheque payable to order purports to be endorsed by or on behalf of

the payee, the drawee is discharged by payment in due course.

(2) Where a cheque is originally expressed to be payable to bearer, the drawee is

discharged by payment in due to the bearer thereof, notwithstanding any
endorsement whether in full or in blank appearing thereon, and notwithstanding
that any such endorsement purports to restrict or exclude further negotiation.
85A. Drafts drawn by one branch of a bank on another payable to order.---

Where any draft, that is, an order to pay money, drawn by. one office of a bank
upon another office of the same bank for a sum, of money payable to order on
demand, purports to be endorsed by or on behalf of the payee, the bank is
discharged by payment in due course. 86. Parties not consenting discharged by
qualified or limited acceptance.---If the holder of a bill of exchange acquiesces in a
qualified acceptance, or one limited to part of the sum mentioned in the bill or
which substitutes a different place or time for payment, or which, where the
drawees are not partners, is not signed by all the drawees, all previous parties
whose consent is not obtained to such acceptance are discharged as against the
holder and those claiming under him, unless on notice given by the holder they
assent to such acceptance. Explanation: An acceptance is qualified---

(a) where it is conditional, declaring the payment to be dependent on the

happening of an event therein stated;

(b) where it undertakes the payment of part only of the sum ordered to petitioner
paid;

(c) where, no place of payment being specified on the order it undertakes the
payment at a specified place, and not otherwise or elsewhere; or where, a place
of payment being specified in the order, it undertakes the payment at some other
place and not otherwise or elsewhere;

(d) where it undertakes the payment at a time other than that at which under is
order it would be legally due. 87. Effect of material alteration.---Any material
alteration of a negotiable instrument renders the same void as against any one
who is a party thereto at the time of making such alteration and does not consent
thereto, unless it was made in order to carry out the common intention of the
original parties. Alteration by endorsee and any such alteration, if made by an
endorsee, discharges his endorser from all liability to him in respect of the
consideration thereof. The provisions of this section are subject to those of
sections 20, 49, 86 and 125. 88. Acceptor or endorser bound notwithstanding
previous alteration: --

An acceptor or endorser of a negotiable instrument is bound by his acceptance or

endorsement notwithstanding any previous alteration of the instrument 89.
Payment of instrument on which alteration is not apparent.---Where a promissory
note, bill of exchange or cheque has been materially altered but does not appear
to have been so altered, or where a cheque is presented for payment which does
not at the time of presentation appear to be crossed or to have had a crossing
which has been obliterated, payment thereof by a person or banker liable to pay,
and paying the safe according to the apparent tenor thereof at the time of
payment and otherwise in due course, shall discharge such person at banker
from. all liability thereon; and such payment shall not be questioned b reason of
the instrument having been altered or the cheque crossed. 90. Extinguish of rights
of action on bill in acceptor's lands. The makes, drawer, acceptor or endorser of a
negotiable instrument is discharged from liability thereon when the person liable
thereon on principal debtor, becomes the holder thereof at or after its maturity.

(2) When the holder of an accepted bill of exchange enter in to any contract with
the acceptor of the nature referred to in Section 39 the other parties are
discharged, unless the hold has expressly reserved his right to charge.

NOTICE OF D1SHONOUR 91.

Dishonour by non-acceptance.---A bill of exchange, is said to be dishonoured by

non-acceptance when the drawee or one of several, drawees not being partners,
makes default in acceptance upon being duly required to accept the bill, or where
presentment is excused and the bill is not accepted. Where the drawee is
incompetent to contract, or the acceptance is qualified, the bill may be treated as
dishonoured.
92. Dishonour by non-payment. --- A promissory note, bill of exchange or cheque
is said to be dishonoured by non-payment when the maker of the note, acceptor
of the bill or drawee of the cheque makes default in payment upon being duly
required to pay the same.

93. By and to whom notice should be given.---When a promissory note, bill or

exchange of cheque is dishonoured by non-acceptance or non-payment, the
holder thereof; or some party thereto who remains liable thereon, must give
notice that the instrument has been so dishonoured to all other parties to whom
the holder seeks to make severally liable thereon, and to some one of several
parties whom he seeks to make jointly. liable thereon. When a bill of exchange is
dishonoured by non-acceptance the drawer or any endorser to whom such notice
is not given is discharged; hut the rights of a holder in due course subsequent to
the omission to give notice shall not be prejudiced by that omission. When a bill
of exchange is dishonoured by non-acceptance and due notice of dishonour is
given, it shall not be necessary to give notice of a subsequent dishonour by non-
payment, unless the bill shall, in the meantime, have been accepted. Nothing in
this section renders it necessary to give notice to the maker of the dishonoured
promissory note or the drawee. or acceptor of the dishonoured bill exchange or
cheque.

94. Mode in which notice may be given.---Notice of dishonour may be given to a

duly authorized agent of the person to whom it is required to be given, or, where
he has died, or his legal representative, or, where he had been declared an
insolvent, to his assignee; may be oral or written; may if written, be sent by post;
and may be in any form; but it must inform the party to whom it is given, either in
express terms or by reasonable intendment, that the instrument has been
dishonoured, and in what way, and that he will be held liable thereon, and it must
be given within a reasonable time after dishonour, at the place of. business or (in
case such, party has no place of business) at the residence of the party for whom
it is intended. If the notice is duly directed and sent by post and miscarries, such
miscarriage does not render the notice invalid.

95. Party receiving must transmit notice of dishonour.-- Any party receiving
notice of dishonour in order to render any prior party liable to himself, give notice
of dishonour to such party within a reasonable time, unless such party otherwise
receives due notice as provided by section 93.

96. Agent for presentment.---When the, instrument is deposited with an agent

for presentment, the agent is entitled to the same time to give notice to him
principal as if he were the holder giving notice of dishonour, and the principal is
entitled to a further like period to give notice of dishonour.

97. When party to whom notice given is dead.---When the party to whom notice
of dishonour is despatched is dead, but the party despatching the notice is
ignorant, of his death, the notice is sufficient.

98. When notice of dishonour is unnecessary.---No notice of dishonour is

necessary--
(a) when it is dispensed with by the party entitled thereto;

(b) in order to charge the drawer when he has countermanded payment,

(c) when the party charged could not suffer damage for want of notice.

(d) when the party entitled to notice cannot after due search be found; or the
party bound to give notice is, for any other reason, unable without any fault of his
own to give it;

(e) to charge the drawers when the acceptor is also a drawer;

(f) in the case of a promissory note which is not negotiable;

(g) when the party entitled to notice, knowing the facts, promises unconditionally
to pay the amount due on the instrument.