Negotiable Instrument Act 1881

Umar Amin Mir

24-09-2014
Meaning and Definitions

NEGOTIABLE

INSTRUMENT


DEFINTION By Justice Willis
As one, the property in which is acquired by any one
who takes it bonafide and for value not withstanding any
defect of title.
Transferable by delivery

A written document
created in favour of some
Person.

CHARACTERISTICS
Must be in writing.

Signed by the Maker.

Involve payment of money only.

Unconditional promise.

Transferee can sue in his own name without giving name
to the debtor.

Forms of Negotiable Instruments


Payable to Order

Payable to Bearer
TYPES OF NEGOTIABLE INSTRUMENTS
Some of the negotiable instruments.

Bill of exchange

Promissory note

Cheque.

PROMISSORY NOTE SEC-4
Is an instrument in writing (not being a bank-note or
a currency note) containing an unconditional
undertaking.

Signed by the maker, to pay certain sum of money
only to or to the order of a certain person or the
bearer of the instrument.
Parties to Promissory Note

Maker Payee
CHARACTERISTICS OF PROMISSORY
NOTE
It must be in writing.
Promise to pay money only.
Promise to pay must be definite.
Must be unconditional.
Signed by the maker.
Maker and the payee must be certain
Amount be certain.
Must be properly stamped.
Other details like number, date, consideration, place etc
are generally found in the promissory note.
SPECIMEN OF A PROMISSORY
NOTE
Rs 6,000/- Pune,
2
nd
October, 2006

Three months after the date I promise to pay Mr.X of mumbai or order a
Sum of Rupees FIFTY THOUSAND FOR VALUE RECEIVED.





TO,
To
Mr. X(payee) Stamp
Address.. Signature of
.. Mr.y (Maker)
Mumbai

BILL OF EXCHANGE SEC-5
Is an instrument in writings containing an unconditional
order signed by the maker.
Three parties to a bill of exchange
-- drawer (maker)

-- drawee (acceptor)

-- payee
CHARACTERISTCS
It must be in writing
It must contain an order to pay and not request.
The order must be unconditional.
The parties to the bill of exchange i.e drawer, drawee
and payee must be certain.
Bill of exchange must be signed by the drawer and
accepted by the drawee.
The sum payable must be certain.
Bill of exchange must contain an order to pay money
only.
Bill of exchange must be stamped properly.
Bill of exchange originally drawn cannot be made
payable to bearer

SPECIMEN OF BILL OF EXCHANGE

Rs. 1,000/- Pune,
2
nd
October,2006


Three months after the date pay to Mr. Z of Nagar or order the sum of Rs.
ONE THOUSAND, for value received.





To
Mr. X (drawee) Accepted Stamp
Address.. Signature of Signature of
.. Mr. X Mr. Y (drawer)
Mumbai
Promissory note Bill of exchange
There are two parties-
maker and payee

It contains an
unconditional promise
pay
It is payable by a person
who makes it.Therefore,
no acceptance is
necessary.
The maker of the
promisssory note is
primarily liable to
payee.

There are three parties
drawer, drawee and payee
It contains an
unconditional order to
pay
It is payable by the other
person directed.
Therefore,it should be
presented to the drawee
for acceptance.
Maker of bill exchange is
secondarily and
conditionally liable to
payee. He becomes liable
only when the drawee
refuses to honour the bill.

No notice of dishonour is
necessary to the maker
Drawer stands in
immediate relation to the
drawee or acceptor and
not the payee Notice
should be given to all the
parties.

CHEQUES (Section6)
A Cheque is a negotiable instrument instructing a
financial institution to pay a specific amount of a
specific currency from a specified transactional
account held in the drawers name with that
institution.

Parties to a Cheque :
The drawer
The drawee
The payee
Essentials of a Cheque
Always drawn on a specified banker.
Always payable on demand.
It does not require acceptance.
It may be made payable to drawer himself (bearer ).
Must be dated.
Valid for 3 months.
Not required to be stamped.


Types of crossing