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• Negotiable: It means capable of being legally transferred from one to another either by delivery or endorsement. • Instrument: A legal document. • A negotiable instrument is a document which entitles a person to a sum of money and which is transferable from one person to another by mere delivery or by endorsement and delivery. The law relating to negotiable instruments is contained in the Negotiable Instruments Act 1881, which deals with promissory notes, bills of exchange and cheques.
1. Freely transferable: The property in a negotiable instrument passes from one person to another by delivery, if the instrument is payable to bearer, and by endorsement and delivery if it is payable to order. 2.Title of the holder free from all defects: A person taking an instrument bona-fide and for value, known as holder in due course gets the instrument free from all defects in the title of the transferor. He is not in any way affected by any defect in the title of the transferor or any other person.
• 3.Recovery: The holder in due course can sue upon a negotiable instrument in his own name for the recovery of the amount. Further he need not give notice of transfer to the party liable on the instrument to pay. • 4.Presumptions: Certain presumptions apply to all negotiable instruments, unless contrary proved: – Consideration: Every negotiable instrument is presumed to have been made, drawn, endorsed, negotiated or transferred, for consideration.
– Date: Every negotiable instrument bearing a date is presumed to have been made or drawn on such date – Time of acceptance: When a bill of exchange has been accepted, it is presumed that it was accepted within reasonable time its date and before its maturity.
– Time of transfer: Every transfer of a negotiable instrument is presumed to have been made before its maturity. – Order of endorsements : The endorsements appearing upon a negotiable instrument are presumed to have been made in the order in which they appear thereon. – Stamp: When an instrument has been lost, it is presumed that it was duly stamped
• Holder presumed to be holder in due course: Every holder of a negotiable instrument is presumed to be a holder in due course. • Proof of protest: In a suit upon an instrument that is dishonoured, the Court, on proof of the protest, presumes the fact of dishonour, until such fact is disproved.