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W h a t is N e g o t ia b le In s t r u m e n t s ? The term negotiable instruments means a written document which entitles a person to a sum of money. A negotiable instruments is transferable by delivery or by endorsement and delivery. The transfer entitles a person to the sum of money mentioned therein. “Thus the negotiable instrument is a document which is legally recognized by custom of trade or law, transferable by delivery or by endorsement and delivery.”
Characteristics Of a Negotiable Instrument Freely transferable: The property in a negotiable instrument passes from one person to another by a simple process, i.e., by mere delivery if it is payable to bearer, and by endorsement and delivery if it is payable to order. Holder’s title free from all defects: The holder in due course (one who acquires the instrument in good faith and for consideration) gets it free from all defects. Recovery: One can sue upon the instrument in his own name. Payable to order or bearer: - It must be payable either to order or bearer Presumption as to Holder:- Every holder of negotiable instrument is presumed to be holder in due course. Presumption as to considerations:- Every negotiable instrument is presumed to have been made, drawn, accepted, endorsed , negotiated or transferred for consideration.
Types of Negotiable Instruments Promissory note. Bill of exchange. Cheque.
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 or to the order of a certain person or to the bearer of the instrument.
Parties MAKER : The person who makes the promissory note and promises to pay is called the Maker. PAYEE: The person to whom the payment is to be made is called the Payee. HOLDER: The holder is either the payee or someone to whom he may have indorsed (transfer) the note is known as Holder. ENDORSER: The person who indorses the note to another is called the Endorser . ENDORSEE: The person to whose favor the note is endorsed is called the Endorsee
Essentials Of The Promissory Notes It must be in writing. It must contain a promise or undertaking to pay a definite sum of money. The promise to pay must be unconditional. It must be signed by the maker. The payee must be identified & must be certain. The sum payable must be certain.
F o r m a t O f P r o m is s o r y N o teRs. 10,000/- Delhi, February10,2012Three months after date I promise to pay cyko onorder the sum of ten thousand rupees, for value received.To, Cyko Stamp 222, Ashok Vihar Sd/-Ram Delhi-110052
Bill Of ExchangeA bill of exchange is an instrument in writing containing anunconditional order signed by the maker, directing a certainperson to pay a certain sum of money only to, or to the orderof certain person to the bearer of the instrument.
Parties DRAWER: The person who makes the bill of exchange is called drawer. DRAWEE: The person who is directed to pay is called drawee. PAYEE: The person to whom the payment is to be made is called payee. ACCEPTOR: When the drawee accepts the bill is called acceptor.
a c t e r is t ic s o f t h e B ill o f E x c h The amount payable must be certain. The payment must be made in money. The bill payable may be either on demand or after a specified period. The bill may be payable either to the bearer or to the order of payee.
Format Of Bill Of ExchangeRs. 500 Greater Noida,21 Feb.2009Three months after the date pay to Ram or order the sum of Five Hundred rupees , for value received.To, Cyko 235,Subhash marg delhi-110006. Stamp In case of need with Accepted Krishna Canara Bank, Delhi Cyko Sd/-
ChequeA cheque is a bill of exchange drawn on a specified bankerand expressed to be payable otherwise than on demand.The maker of a bill of exchange or Cheque is called the“Drawer"; the person thereby directed to pay is called the"Drawee".
Parties DRAWER: The person who makes a cheque is called Drawer. DRAWEE: The person who is directed to pay is called Drawee. PAYEE: The person to whom the payment is to be made.
e n t ia l c h a r a c t e r is t ic s o f a C h In writing Express order to pay Definite and unconditional order Signed by drawer Order to pay certain amount Payable on demand
Forma t O f C he queNo.…….. Date………..2010 Pay…………………………………………………………or bearer the sum of Rs………………………………… Rs………………… A/c No LF No Sd/-PUNJAB NATIONAL BANKSubzi Mandi,Delhi -110007 “5777100” 111013035”
C r o s s in g o f C h e q u eA cheque is said to be crossed when it bears across its facetwo parallel transverse lines which are usually drawn onthe left hand top corner of the Cheque.Legally there are two kinds of crossing.General crossing: The drawing up of two parallel lineson the face of the check at the top left hand corner with orwithout the words & Co not negotiable or Account payeeonly is known as a General Crossing.Special crossing: A check is deemed to be crossedspecially when it bears across its face the name of thebanker either with or without the words not negotiable.
NegotiationAn instrument is said to be negotiated: When a promissory note, BOE, cheque is transferred to any person so as to constitute that person the holder of the instrumentTransfer with an intention to transfer the title of the instrument. Negotiation by delivery Negotiation by endorsement and delivery
PresentmentPresentment for Acceptance (required only in case of BOE)Presentment for paymentPresentment made to the drawee.Must be made before the date of maturity
DishonorA negotiable instrument is said to be dishonored by non-payment when the maker, acceptor or drawee, as the casemaybe makes default in payment upon being duly requiredto pay the same. Dishonor by non payment Dishonor by non acceptance