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For example:
Pay Ram
Pay Ram or Order
Pay to the Order of A
Pay Ram and Shyam, and.
Pay Ram or Shyam etc
A promissory note, bill of exchange, or cheque payable
to order, which is expressed to be so payable, or which
is expressed to be payable to a particular person and
does not contain words prohibiting transfer or indicating
that it shall not be transferable, are all examples of
negotiable instruments.
But a negotiable instrument may contain any words
restricting its transferability, expressly or impliedly,
e.g., pay to Ram only or pay to Ram and none else. If
it is made so, it will not be treated as payable to order
and thereby shall not be a negotiable one.
5.
6.
7.
The negotiable instruments can broadly be classified under the following eight
categories:
1. Bearer instrument
2. Order instrument
3. Inland instrument
4. Foreign instrument
5. Time instrument
6. Demand instrument
7. Ambiguous instrument
8. Inchoate instrument
1. Bearer Instrument. A bearer instrument is a negotiable instrument payable
to bearer. It is one (i) which is expressed to be so payable; or
(ii) on which the
only best endorsement is an endorsement in blank.
A bearer instrument can be negotiated by mere delivery. The holder (anyone
possessing it) of a bearer instrument can obtain the payment of the instrument
whether or not his name appears on the instrument. The bearer however may be
required to acknowledge the receipt of money by putting his signature on the
book of the instrument.
The expression after sight in a promissory note implies that the payment
cannot be demanded on it unless it has been shown to the maker. But in case
of a bill of exchange, the expression after sight denotes after acceptance (if
accepted), or after noting for non-acceptance, or after protest for nonacceptance.
Examples:
3 months after date
7 days after sight
Payable on 2nd Monday of July 2008
Forty days after Diwali
6. Demand Instrument: A promissory note or bill of exchange in which no
time for payment is specified, and a cheque, are payable on demand. Thus, a
cheque is always payable on demand while a promissory note and a bill of
exchange in which no time is specified for payment are payable on demand.
Section 21 further provides that if a note or bill bears the expression at
sight and on presentation, it would mean that these instruments are
payable on demand. But it should be noted that the expressions payable at
sight and payable on presentation are slightly different from payable on
demand. The former must be presented before payment is demanded on
whereas the latter need not be presented for payment.
Promissory Note
A promissory note is an instrument in
writing (not being a bank note or currency
note)
containing
an
unconditional
undertaking, signed by the maker to pay a
certain sum of money only to, or the order
of a certain person, or only to bearer of the
instrument.
(Section 4]
The person making the promise to pay is
called the maker and the person who is
to receive the money stated in the note is
called the payee.
Specimen 2
Rs. 5000/-
New Delhi
2 November 2010
Ninety
days after date I promise to pay Mr. Y or order the sum of rupees Five thousand only.
Revenue
To,
Revenue Stamp
Stamp
Mr. Y
New Delhi Mr. Y (Sd/- on stamp)
Bill of Exchange
4.
5.
8.
9.
1.
2.
3.
4.
5.
6. Makers
CHEQUES
Parties to a cheque
A cheque generally involves the following parties :
1. Drawer The person who makes the cheque
2. Drawee The bank of the drawer on whom thecheque is
drawn
3. Payee The person who is to receive the money stated
in the cheque
4. Holder A person who is in the possession of a cheque
and is entitled to receive or recover theamount thereon.
5. Endorser The maker, drawee, payee or endorseecan
endorse a cheque by signing on the back of it. The
endorser of a cheque has the status of a new drawer.
6. Endorsee The transferee or the person in whose favour
the instrument has been endorsed.
Essentials of a Cheque
Point of
S.No.
Bill of Exchange
Cheque
Difference
1.
Drawee
2.
Payable
on the cheque.
3.
Grace
period
4.
Acceptance
on demand.
5.
is
intended
for
immediate
payment.
Payable to
bearer
to bearer on demand
6.
Estoppel of
Banker
or
the
drawee
is
payment
7.
Presentment
The
drawer
of
bill
is The
drawer
of
cheque
is
for payment
8.
Notice of
dishonour
drawers
sufficient and
account
appropriate
9.
Crossing
The
Act
contains
is
HUNDIS
1.
2.
3.
4.
5. Dhanijog hundi. Dhani in vernacular means owner. Thus, a dhani jog hundi