Definition of Negotiable Instruments: Instruments: A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. Negotiable instruments are often defined in legislation. For example, according to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument is a promissory note, bill of exchange or cheque payable either to order or to bearer. Cheque also includes demand draft [Section 85A].
„Negotiable‟ means „transferable‟ by delivery, and „Instrument‟ means a „written document by which a right is created in favour of s ome person‟. According to the section 13(1) of the Negotiable Instruments act of 1881, A Negotiable instrument means a promissory note, Bill of exchange or cheque payable either to order or to the bearer. According to Section 13 (a) of the Act, “Negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer, whether the word “order” or “ bearer” appear on the instrument or not.” In the words of Justice, Willis, “A negotiable instrument is one, the property in which is acquired by anyone who takes it bonafide and for value notwithstanding any defects of the title in the person from whom he took it”.
Types of Negotiable Instruments: Promissory Note: A promissory note is an instrument in writing
containing an unconditional undertaking signed by the maker to pay a certain sum of money only to a certain person or the bearer of the instrument.
Bill of Exchange: A bill of exchange is an instrument in writing
containing an unconditional order, signed by the maker, directing a certain person to pay another person a certain sum of money. Cheque: A cheque is a bill of exchange on a specified banker and not expressed to be payable otherwise than on demand. Hundis: Negotiable instruments written in any vernacular language according to the Indian Mercantile common law are called as Hundis.
Dishonour of Negotiable Instruments: Dishonour by Non Acceptance Bill of Exchange Dishonour by Non Payment Promissory Note Bill of Exchange
Cheque
Dishonour by Non Acceptance: When a Drawee / Drawees (not being partners) make default in
Acceptance The Presentment for Acceptance is excused and the Bill remains unaccepted Drawee is incompetent Drawee makes the Acceptance qualified Drawee is fictitious person or absconding IMP: In case of the note where „drawee in case of need‟ is named in a bill of exchange,the bill is not dishonoured until it has been dishonoured by such drawee (Sec 115)
Dishonour by Non Acceptance: 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 the frawee of the cheque makes default in payment upon being duly required to pay the same(Sec 92) A promissory note, bill of exchange or cheque is said to be
dishonoured by non payment when payment is excused by the maker of the note or the acceptor of the bill and the note remains unpaid at or after.
Acceptance:
Favorites Show Examples: 1. Agreements: Granting of an unqualified consent (whether express or implied) to the terms of a contract by the involved parties. When an offer is received, it is either accepted or countered (with a counter offer). A counter offer obligates the other party to accept it or respond with its own counter offer. Accepting an offer (or a counter offer) creates a binding contract. Sometimes, the term 'subject to contract' is used in offers or acceptances to indicate that the parties intend to be bound only under a formal contract when it is prepared and signed (executed). 2. Commerce: Buyer's approval of the goods supplied at their invoiced price, signified by the act of taking delivery, and/or use, of the goods without protest.
3. Documentary credit: Creation of an unconditional and binding promise to pay a bill of exchange, by signing it under the word 'accepted.' Generally, anyone who signs a bill of exchange on which the accepting firm's name is not mentioned in legible characters, is held personally liable for the amount of the bill if it remains unpaid. See also general acceptance and qualified acceptance. 4. Legal: Execution of an official document by an authorized agent or representative of the government. 5. Shipping: Acknowledgment by a consignee of the receipt of a consignment, thus terminating the contract of carriage.
