THE NEGOTIABLE INSTRUMENTS ACT 1881

Negotiable Instruments means a promissory note, bill of exchange or cheque payable either
to order or to the bearer (Sec. 13(1)).

ESSENTIAL CHARACTERISTICS OF A NEGOTIABLE

INSTRUMENT

Payable Freely Presumptio Title of Presumption as to

to Order Transferabl n as to Holder in consideration
or Bearer e Holder Due Course

a) Payable to order or bearer: It must be payable either to order or to bearer.

b) Freely Transferable: An instrument payable to order is negotiable by endorsement

and delivery and an instrument payable to bearer is negotiable by mere delivery.

c) Presumption as to Holder: Every holder of a negotiable instrument is presumed to

be a holder in due course.

d) Title of holder in due course free from all defects: A holder in due course (i.e.
the person who become the possessor of negotiable instrument before maturity, for
valuable consideration and in good faith) get the instrument free from all defects in
the title of the transferor.

e) Presumption as to Consideration: Every negotiable instrument is presumed to

have been made, drawn, accepted, endorsed, negotiated or transferred for
consideration.

PROMISSORY NOTE:
A promissory note is an instrument in writing (not being bank or a currency note) containing
an unconditional undertaking, signed by the maker to pay a certain sum of money only to,
or to the order of certain person or to the bearer of the instrument (Sec-4).

Note:
1. A promissory note may be payable on demand or after a definite period of time.
2. The words ‘or to the bearer of the instrument’ have become inoperative in view of
the provision contained in Section 31(2) of the RBI Act, which provides that no person in
India other than RBI or the Central Government can make or issue promissory note to
the bearer or the instrument.
3. A bank note or currency note is not a promissory note because it is money itself.

ESSENTIAL CHARACTERISTICS OF A PROMISSORY

NOTE

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 Promise to Promise
Express Definite Signed
In Pay to Pay Certain
1. Writing
In Writing: Promise
It must beUnconditional by the
in writing. In other words, Certain
an oral promise will not make
Money Payee a
to note.
promissory Pay Promise Maker
Sum only
2. Express promise to pay: There must be an express promise to pay and not mere
acknowledgement of indebtedness.
3. Definite unconditional promise: The promise must be definite and unconditional.
It may be noted that a promise to pay is not conditional if it depends upon an event,
which is certain to happen, but not the time of its occurrence may be uncertain.
4. Signed by the maker: It must be signed by the maker. The purpose of signature is to
authenticate the instrument. The signatures can be made on any part of the Instrument.
5. Promise to pay certain sum: The promise must be to pay a certain sum. The sum
payable is also certain in the following cases.
a) Where it is payable along with interest and either the amount of interest itself or
the rate or interest is given.
b) Where it is payable at a specified rate of exchange.
c) Whether it is payable by installments with a provision that a default being made
in payment, the unpaid balance shall become due (Sec – 5).
6. Promise to pay money only: The payment must be in money only.
7. Certain payee: The payee must be certain. Where the payee is designated
by description only (say captain of particular cricket team), the promissory note is valid if
the payee can be ascertained by evidence.
A promissory note cannot be made payable to the maker himself. Such a note is invalid.
However, it becomes a valid promissory note if it is endorsed by the maker because it then
becomes payable to bearer (if endorsed in blank) or it becomes payable to the endorsee or
his order (if endorsed specially).

A promissory note must be stamped with adhesive stamp or engrossed on a stamp paper of
proper value.

Parties to a promissory note:

There are two parties to a promissory note as under.
a) The maker: The person who makes the promissory note.
b) The payee: The person to whom or to whose order the payment is to be made is
called the payee.
BILLS 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 a certain sum of money only to, or to the order
of a certain person or the bearer of the instrument (Sec – 5).

Note:
1. A bill of exchange may be made payable to bearer on demand
or after a definite period of time.
2. A bill of exchange cannot be made payable to bearer on
demand because section 31 of the RBI Act prohibits the issue of such bills of exchange.

Essential Characteristics Of Bills Of Exchange

1. In writing: It must be in writing.

2. Express order to pay: There must be an express order to pay and not a mere
request to pay.

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3. Definite and unconditional order: The order must be definite and unconditional.

4. Signed by the drawer: the drawer must sign it.

5. Order to pay certain sum: The order must be to pay certain sum.

6. Order to pay money only: The order must be to pay money only.

7. Certain three parties: The three parties (i.e. drawer, drawee and payee) must be
certain and must be mentioned in the instrument. It may be noted that the drawer and
payee can be the same person but the drawer and drawee cannot be the same person.

Parties to Bill of Exchange:

a) Drawer: The person who draws a bill of exchange is called the drawer.

b) Drawee: The person on whom the bill of exchange is drawn is called the drawee.

c) Payee: The person named in the instrument to whom or to whose order the money is
directed to be paid by the instrument, is called the payee.

CHEQUE
A cheque is a bill of exchange, which is

a) Drawn upon a specific banker, and

b) Payable on demand.

Essential Characteristics Of Cheque

1. In writing: It must be in writing.

2. Express order to pay: There must be an express order to pay

and not request to pay.

3. Definite and unconditional order: The order must be definite

and unconditional.

4. Signed by the drawer: It must be signed by the drawer.

5. Order to pay certain sum: The order must be to pay certain

sum.

6. Order to pay money only: The order must be to pay money

only.

7. Certain three parties: The three parties (i.e. drawer, drawee and
payee) must be certain and must be mentioned in the instruments.

In addition to the above said essentials of a bill of exchange, the cheque must also
satisfy the following two requirements.
1. Drawn upon a specified banker: It must always be drawn upon a specified
banker.

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 2. Payable on demand: It must always be payable on demand.
Thus, all cheques are bills of exchange in the sense that these have all the essential
elements of a bill of exchange. But all bills of exchange are not cheques because bill of
exchange becomes a cheque only when it satisfies the aforesaid two additional
requirements.

Notes:

1. No acceptance of cheques is required.

2. Cheque is not required to be stamped.

There are three parties to a cheque as under:

a) Drawer: The person who draws the cheque is called a drawer.

b) Banker: The bank on which the cheque is drawn is called the drawee.

c) Payee: The person in whose favour the cheque is drawn is called the payee. The
payee may be a third party or the drawer himself.

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 PARTIES TO NEGOTIABLE INSTRUMENTS
Holder:
Any person entitled to the possession of the instrument in his name and to receive or
recover the amount due there on from the parties liable there to (Sec-8).
Thus, in order to be called a ‘holder’ a person must satisfy the following two conditions:
a) He must be entitled to the possession of the instrument in his own name.
b) He must be entitled to receive or recover the amount due thereon from the parties
liable there to.

Holder In Due Course

Means any person who for consideration became the possessor of a Negotiable Instrument if
payable to bearer, or the payee or endorsee there of if payable to order, before the amount
mentioned in it become payable, and without sufficient cause to believe that any defect
existed in the title of the person from whom he derived his title (S-9).

Thus, in order to be called ‘Holder in due course’ a person must possess the following
qualifications.
1. He must be a holder.
2. He must be a holder for valuable consideration.
3. He must have become the holder of the Negotiable Instruments before its maturity.
4. He must take the Negotiable Instrument complete and regular on the face of it.
5. He must have become holder in good faith-without having sufficient cause to believe
that any defect existed in the title of the transferor.

Privileges Of Holder In Due Course

1. He gets a better title than that of the transferor.
2. Privilege in case of inchoate stamped instruments (Sec-20)
3. Liability of prior parties.
4. Privilege in case of factious bills (S-42)
5. Privilege when an instrument delivered conditionally negotiated.
6. Estoppel against denying original validity of instrument (S-40).
7. Estoppel against denying original validity of payee to indorse (Sec-121).

Capacity of Parties
Every person capable of contracting, according to the law to which he is subject, may bind
himself and be bound by the making, drawing, acceptance, endorsement, delivery and
negotiation of a promissory note, bill of exchange or cheque (Sec-26)

This section thus declares that capacity to incur liability on negotiable instruments is co-
extensive with the capacity to contract.

1. Minor – section 26 declares that a minor may draw, deliver and negotiate a
Negotiable Instrument so as to bind all parties except himself. Minor can be a party
to Negotiable Instrument but he does not incur any liability himself although other
adult parties to the instrument remain liable thereon.

2. Insolvent – An insolvent is not competent to draw, make, accept or indorse a

Negotiable Instrument. But if he indorses an instrument of which he is payee, the
endorsement is valid as against all prior parties liable except himself.

3. Joint Stock Company - A company being an artificial person is competent of doing

only such acts as are expressly or impliedly allowed by its memorandum of
Association.

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Agent
An agent can execute Negotiable Instruments so as to bind his principal in that capacity (i.e.
as a drawer, maker, acceptor or endorser) only for which he is expressly authorized by the
principal, in very clear terms for and on behalf’ per pro’.

Legal Representative:

A legal representative of a deceased person who signs his name to a Negotiable Instrument
(either as a maker or drawer or acceptor or factitious) is liable personally there on unless he
expressly limits his liability to the extent of the assets inherited by him for the said deceased
(Sec-29).

‘Without recourse to me personally’

‘Without recourse against the estate of the deceased only’

Liability Of Parties To Negotiable Instruments

1) Liability of Drawer (S-30).

2) Liability of Drawee of cheque (S-31).
3) Liability of ‘maker’ of note and ‘acceptor’ of the bill (Sec-32).
4) Liability of Factitious (S-35).

PRESENTMENT OF NEGOTIABLE INSTRUMENTS

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Exhibiting, presenting or placing of a Negotiable instrument for acceptance, sight or
payment before the acceptor, maker, drawee or other party liable there on by or on behalf
of the holder is called ‘presentment’. Thus presentment may be made for any of the
following three purposes.

I. Presentment for acceptance.

II. Presentment for sight.
III. Presentment for payment

1. PRESENTMENT FOR ACCEPTANCE

It is only Bills of Exchange of a certain type that require acceptance. A bill is said to be
accepted when the drawee puts his signature on it signifying his assent to the order of the
drawer that he will pay the bill at the time when it is due. The liability of the drawee does
not arise until he has acceptance these bills. The acceptance is given by the Drawee, by
signing his name on the bill. The ‘word’ accepted is also some times added, but this is not
necessary. After the Drawee has accepted the bill, he is known as the acceptor. The
essentials of a valid acceptance are as follows:
a) It must be written on the bill.
b) It must be signed by the Drawee personally or through a duly authorized agent.
c) The accepted bill must be delivered to the holder.

Presentment for acceptance is not obligatory in all cases but in the following cases, a bill
must be presented for acceptance in order to make the parties to the bill liable thereon.
a) A bill payable some period after sight or after presentment in order to fix its date
of maturity (Sec-61)
b) A bill in which there is an express stipulation that it shall be presented for
acceptance before it is presented for payment.

Presentment for acceptance must be made at a reasonable hour on a business before the
bill is over due (S-61)

Modes Of Acceptance:
An acceptance may be general or qualified.

1. General acceptance: An acceptance is

general or absolute where the Drawee, while accepting the bill, does not attach any
condition or qualification to it.
2. Qualified acceptance: An acceptance is
qualified where it is given subject to some condition or qualification.

Presentment Of Acceptance To Whom

Presentment for acceptance may be made:
1. To the Drawee or his duly authorized agent.
2. To his legal representative if the Drawee has died.
3. To his assignee, if the Drawee has been declared insolvent.
4. To all the drawees, if there are several drawees unless they are partners or agents of
another
5. Drawee in case of need.

Presentment For Acceptance Excused:

Presentment may be excused where:
1. The Drawee is a fictitious or incompetent person.
2. He cannot, after reasonable search, be found.
3. He is dead or insolvent.

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 4. Although the presentment has been irregular, acceptance has been refused on some
other ground.

Acceptor For Honour

Normally a stranger to a bill cannot accept it, but he may, with the consent of the holder,
accept the bill in place of the Drawee for the honour of some party liable on the bill. Such an
acceptor is known as acceptor for honour.

2. PRESENTMENT FOR SIGHT

A promissory note payable after sight must be presented to the maker for sight to determine
its maturity, during business day. If the maker cannot be found after a reasonable search,
presentment is excused and the note may be treated as dishonoured (Sec – 62).

3. PRESENTMENT FOR PAYMENT

Promissory Notes, bills of exchange and cheques must be p resented for payment to the
maker, acceptor or Drawee thereof respectively, by or on behalf of the holder. If the default
is made, the parties other than the parties primarily liable are discharged of their liability
(Sec - 64).

Presentment for payment must be made during the usual hours of business. It must be
made –
a) At the place of payment specified in the instrument.
b) If no place is specified at the place of business or residence.
c) In any other case wherever the party liable to pay can be found.

Presentment For Payment To Whom

a) To the duly authorized agent of the drawer, maker or acceptor, as the case may be.
b) Where the Drawee, maker or acceptor has died, to his representative;
c) Where he has been declared insolvent, to his assignee.

Delay in presentment for payment is excused if it is caused by circumstances beyond the

control of the holder.

Presentment for Payment is Not Necessary:

a) Where it is intentionally prevented by the maker, Drawee or acceptor, or
b) Where the business of the maker, Drawee or acceptor is closed or he can not after
due search be found, or there is no person at the place of payment, or
c) Where there is a promise to pay not withstanding non-presentment, or
d) Where presentment is expressly or impliedly waived, or
e) Where the bill is dishonoured by non-acceptance, or
f) Where the Drawee is a factitious person, or
g) Where the presentment becomes impossible.

Payment for Honour:

Just as bill may be accepted for the honour of a party to the bill it may also be paid for the
honour if a party liable to pay the bill.

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DISHONOUR AND DISCHARGE OF NEGOTIABLE INSTRUMENTS
Dishonor Of Negotiable Instruments
A negotiable instrument may be dishonored by
1. Non acceptance
2. Non payment

Dishonor By Non Acceptance

A bill of exchange is said to be dishonored by non-acceptance in the following cases (s-91)
a) When the Drawee does not accept the bill with in 48 hrs from the time of its
presentment, though the bill is properly presented.
b) When there are several drawers (who are not partners) and any of them does not accept
the bill (sec 63)
c) When the Drawee makes a qualified acceptance
d) When the Drawee is incompetent to contract
e) When presentment for acceptance is not obligatory, and the bill is not accepted
f) When the Drawee is factitious person or is not traceable despite reasonable search (s-
61)

Where a ‘Drawee incase of need is’ named in the bill (by the drawer or any factitious), the
bill is not deemed to be dishonored till it has been dishonored by such a Drawee also (S –
115).

Dishonour by Non – Payment

A Negotiable Instrument is said to be dishonoured by non-payment when the maker of the
note, acceptor of the bill or Drawee bank of the cheque, as the case may be makes
default in payment, when duly presented for payment (S - 92). Further an instrument
is also dishonoured by non-payment when presentment for payment is excused and
the instrument when overdue remains unpaid (Sec-76).

Effect of The Dishonor

The effect of the dishonor of a negotiable instrument is that drawer and all the intermediate
indorses. Become liable to the holder, whether the dishonor is by the non-acceptance or
nonpayment provided the holder has given all of them a notice of such dishonor.

Notice Of Dishonor
When a negotiable instrument is dishonored either by non acceptance or by non payment
the holder of the instrument or some prior who is liable thereon must give a notice of
dishonor to all the prior parties whom he wants to hold liable on that instrument.

Notice by Whom?
Notice of dishonor must be given by the holder or by some party to the instrument who
remains liable thereon (s-93)

Notice to Whom?
Notice of dishonor must be given to all the parties (other than the maker of the note
acceptor of the bill or a Drawee of a cheque) to whom the holder seeks to make liable or to
their duly authorized agents

Mode Of Giving Notice

According to (S - 94) the notice of the dishonor may be oral or written if it is written it may
be sent by post. It should be given within a reasonable time after dishonor, at a place of
business or at the residence of the party for whom it is intended.

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What is Reasonable Time?
Regard shall be had to the nature of the instrument, the usual course of dealing with respect
to similar instruments and the distance between the parties and in calculating such time
public holidays shell be excluded (S - 105)

When Notice Of Dishonor Is Unnecessary

Notice of dishonor is not necessary, that is the parties are liable without any notice of
dishonor in the following cases mention in sec 98
1. When it is dispensed with by the party entitled to the notice.
2. When the drawer of a cheque countermanded payment.
3. When the party charged could not suffer damage for want of notice.
4. When the party entitled to notices cannot after due search be found or the party
bound to give notice is because of justifiable reason (e.g. death, accident, serious
illness), unable to give it.
5. When the drawer also happens to be the acceptor
6. In the case of a promissory note which is not negotiable
7. When the party entitled to notice, promises to pay unconditionally the amount due
on the instrument after dishonor and with full knowledge of facts

Consequences Of Not Giving Notice Of Dishonor

Any party to a negotiable instrument (other than the maker of a note acceptor of a bill or
Drawee of a cheque) to whom notice of the dishonor is not sent by the holder is discharged
from his obligation under the instrument and cannot be sued by the holder unless the
circumstances are such that no notice of the dishonor is required to be sent. The drawer or
indorse who has not received notice is discharged not only on the bill or note but also in
respect of the original consideration (Mohd. Rafi vs Qasi Mahzar).

Noting:
Noting is the authentic and official proof of the presentment and dishonor of a negotiable
instrument. In case of cheques it is not necessary and also Inland bill and notes noting is not
dishonor and must specify:
1) The date of dishonor
2) The reason assigned for such dishonor and
3) The notary’s charges

Protest
Protest is a formal certificate of dishonor issued by the notary public to the holder of the bill
or note on the demand (noting is merely a record of dishonor on the instrument itself)
(Sec100)

Protest For Better Security

The only advantage of protest for the better security is that it enables the bill to be accepted
for honor, for Sec 108 provides that when a bill of exchange has been noted or protested for
non acceptance or fro the better security the sane can be thereafter be accepted for honor

Noting and protest of inland bill or notes is not compulsory but foreign bills must be
protested for dishonor if so required by the law of the place where they are drawn sec 104

Contents Of Protest (Sec – 101)

The protest must contain the following:
1) The instrument itself or a literal transcript of the instrument containing everything
written or printed thereon.
2) The name of the person for whom and against whom the instrument has been protested
3) The fact and the reason for dishonor i.e. stating that payment or acceptance or better
security as the case may be was demanded by the notary public from the person
concerned and he refused to give or did not answer or that he could not be found
4) The place and time of dishonor
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5) The signature of the notary public
6) In case of acceptance for honor or payment for honor the names of the persons by whom
and for it is accepted or paid.

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 DISCHARGE OF THE INSTRUMENT AND THE PARTIES
An instrument is said to be discharged only when the party who is ultimately liable thereon
is discharged from liability. All rights of action under the instrument are completely
extinguished and the instrument ceases to be negotiable.

Modes of Discharge of an Instrument:

An instrument may be discharged in any one of the following ways:

MODE OF DISCHARGE OF AN INSTRUMENT

BY PAYMENT BY PARTY PRIMARILY BY BY

IN DUE LIABLE BECOMING CANCELLATION RELEASE
COURSE MEMBERS

a) By Payment In Due Course: If the maker or acceptor makes payment to the holder
of the instrument at or after maturity in good faith and without notice of any defect in
the title to the instrument, the instrument is discharged.
b) By Party Primarily Liable Becoming Holder (Sec – 90): If the acceptor of a bill
of exchange becomes its holder at or after maturity in his own right, the instrument
is discharged. This happens by ‘Negotiation Back.’
c) By Cancellation: If the holder of an instrument cancels acceptor’s or factitious
name with intent to discharge him, the instrument is discharged.
d) By Release: If the holder of an instrument renounces his right against all the parties
to the instrument, the instrument is discharged.

Meaning Of Discharge Of A Party

Any party is said to be discharged only when a party or parties (other than a party
ultimately liable on instrument) to a negotiable instrument is or are discharged and the
instrument continues to be negotiable with the liabilities of undischarged parties attached
there to.

Modes Of Discharge Of A Party (S-82 To 90)

a) By Payment (Sec – 82(C)): If the maker, acceptor or endorse makes payment to

the holder of the instrument at or after maturity in good faith and without notice of
any defect in the title to the instrument, all the parties to the instrument are
discharged.

b) By Cancellation (S – 82(A)): If the holder of an instrument cancels the name of

any of the parties liable under that instrument with the intention to discharge him,
such party and all subsequent parties deriving their title from such party are
discharged from the liability to the holder.

c) By Release (S – 82(B)): If the holder of an instrument renounces his rights against

any party to the instrument, such party is discharged from the liability to the holder.

d) By Allowing Drawee More Than 48 Hours To Accept (S – 83): If the holder of a

bill of exchange allows the Drawee more than 48 hours exclusive of public Holidays
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 to decide which he will accept the same, all previous parties not consulting to such
allowance are discharged from liability to such holder.

e) By Non-Presentment Of Cheque Within A Reasonable Time (S –84): The

drawer of a cheque is discharged to the extent of the loss or damage suffered by him
if the following two conditions are fulfilled:
i) The cheque is not presented for payment within a reasonable time of its issue,
and
ii) The drawer suffers actual damages through the delay.

f) By Payment of Cheque Payable to Order or Bearer by the Drawee Banker (s

– 85):
i) When 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. (Sec – 85(1)).
ii) Where a cheque is originally expressed to be payable to bearer the Drawee is
discharged by payment in due course to the bearer thereof. (S – 85(2))

The rule of discharge applicable to a cheque payable to order also applies to a

draft drawn by one of the banks upon another payable to order or demand (Sec –
85 A).

g) By Qualified Acceptance (S – 86): If the holder of bill acquiesces (or assents) to a

qualified acceptance, all the previous parties shall be discharged from liability, unless
on notice being given to them, they assent to such acceptance.

h) By Material Alteration (S – 87): Any material alteration of a negotiable instrument

renders the same void as against any one who is party there to at the time of making
such alteration and does not consent there to, unless it was made in order to carry
out the common intention of the original parties.

Alteration by the endorsee – Any such alteration, if made by an Endorsee,

discharges his factitious from all liability to him in respect of the consideration
thereof.

i) By Payment Of An Instrument On Which Alteration Is Not Apparent (S - 89):

The payer of a material altered instrument is discharged from all liability under the
instrument if the following two conditions are fulfilled.

1. The alteration must not be apparent.

2. The payment must be made in due course.

j) By Acceptor Becoming Holder Of A Bill At Or After Maturity (S – 90): If a bill

of exchange which has been negotiated is, at or after maturity, held by the acceptor
in his own right, all right of action thereon are extinguished. This happens by
‘Negotiation back’.

k) By Operation Of Law: A negotiable instrument is also discharged by operation of

law such as –
i) Under the law of Limitation Act, on the expiry of the period prescribed for the
recovery of the amount due.

ii)Under the law of the Insolvency, or declaration of a party as an insolvent by an

order of the court.

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LIABILITY OF PARTIES

1. Liability Of Drawer: The drawer of a bill of exchange or cheque is a liable in case

of dishonour by acceptor or drawee thereof to compensate the holder or every factitious
who has been compelled to pay for the suffered by him, provided that a notice of
dishonor has been given to, or received by the drawer (S-30).

2. Liability Of Drawee Of A Cheque: The Drawee of a cheque (who is always a

banker) is under a contractual liability to honor the cheques issued by its customers,
provided there are sufficient funds (of credit) in the account of the customer properly
applicable to the payment of such cheque.

Liability for unjustified Dishonour: If the banker defaults in making a payment of

cheque, it must compensate the drawer for any loss or damage caused by such default
(S-31).

3. Liability Of Maker Of A Note And Acceptor Of A Bill: The maker of a note and
the acceptor of a bill, are primarily liable to pay the amount to the holder on demand.

Acceptors Liability on a forged instrument – The maker of a bill of exchange already

endorsed, is not relieved of his liability by reason that such endorsement is forged; if he
knew or had reason to believe that the endorsement was forged.

Acceptors Liability on a bill drawn in fictitious name- an acceptor of a bill of exchange

drawn in a factitious name and payable to the drawer’s order, is not relieved of his
liability to any holder in due course, for the reason that the parties to the bill were
factitious, provided the drawer’s signature and the endorsement are in the same hand
writing.

4. Liability Of Transferor By Delivery: Since, the bearer instrument can be

transferred by mere delivery, the person who so transfers, it is known as ‘transferor by
delivery’ the Indian law provides nothing about the liability of a transfer or by delivery.
As such, a transferor by delivery does not incur any liability since, his name does not
appear or the instrument in any capacity.

5. Liability Of Endorser: Every Endorser of a negotiable Instrument is liable to all

subsequent holders of the instrument in case of its Dishonour.

6. Liability Of Prior Parties To Holder In Due Course: Every prior party to a

negotiable instrument is duly satisfied.

7. Liability Under Accommodation Bills: A bill drawn, accepted or indorsed without

consideration, and for the help of a party, is called accommodation, and for the help of a
party, is called the accommodation bill. The primary and ultimate liability is that of the
accommodated party. But when the accommodation bill has been transferred to any
person for consideration, such holder in due course or any person for consideration, such
holder in due course or any transferee from him, I can recover from all the prior parties
to the bill.

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Liability of acceptor for Honor- When a bill of exchange dishonored by non-acceptance or
for want of better security, is accepted by a person who is not already liable on the bill,
for the honor of any party, then the person so accepting is called ‘Acceptor for honor.’

An acceptor for honor has the same rights as the party for whose honour he accepts, has
against his prior parties.

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