BCOC-133 BUSINESS LAW Q1. Contract law. It’s essential elements for valid Contract. Contract law is a branch of law that governs agreements and enforceable promises between parties. For a contract to be consideréd valid and legally binding, it must contain certain essential elements. These elements vary depending On the jurisdiction, but generally include the following: Offer: An offer is'a clear expression of willingness by one party (the offeror) to enter into a contract on specific terms. It must be communicated to the other party (the offeree) with the intention of creating a legally binding agreement. Acceptance: Acceptance is the unequivocal agreement by the offeree to the terms of the offer. It must be communicated to the offeror, and it generally must match the terms of the offer exactly. Any, modifications to the offer would be considered a counteroffer. Consideration: Consideration refers to Something of value exchanged between the parties. It can be money, goods, services, or a promise to do or refrain from doing something. Both|parties must provide consideration for the contract to be valid. Consideration distinguishes a contract from a mere gift or gratuitous promise. Intention to create legal relations: The parties must intend to create a legally binding agreement. Social or domestic agreements are usually presumed/not to have this intention, while business agreements are presumed to have it: However, this presumption can be rebutted depending on the circumstances. Capacity: The parties entering into acontract must have the legal capacity to do’so. This means they must be of-legal age (usually 18 years or older) and of sound mind. Minors, mentally incapacitated individuals, and those under the influence of drugs or alcohol may lack capacity. Consent: Consent refers to the voluntary agreement of the parties to enter into the contract. It. must be free from duress, undue influence, fraud, misrepresentation, mistake, or other vitiating factors. If consent is obtainéd through improper means, the contract may be voidable. Legality: The purpose and subject matter of the contract must be legal. Contracts that involve illegal activities or violate public policy.are generally unenforceable or void. a2. Define the term “proposal “and “Acceptance”. Discuss the essentials of a valid offer, In contract law, the terms “proposal” and “acceptance” are related to the process of forming a contract: Let's define éach term and then discuss the essentials of @ valid offer.Proposal: In contract law, a proposal refers to anv offer made by one party (the offeror) to another party (the offeree) with the intention of entering into a contract. The proposal sets out the terrtis and conditions upon which the offeror is willing to be bound. It can'be communicated orally, in writing, or through conduct, depending on the circumstances. Acceptance: Acceptance is the unqualified and unequivocal agreement by the offeree to the terms of the offer. It indicates the offeree’s willingness to be bound by the terms of the contract. Like the proposal, acceptance canbe communicated orally, In writing, or through conduct, as long as it effectively communicates the acceptance of the offer. Essentials of a Valid Offer: For an offer to be considered valid and capable of creating a legally binding contract, it must meet certain essential requirements. Here are the key elements of a valid offer: Intention to Create Legal Relations: The offeror must demonstrate a clear intention to create legal relations. It means that the offeror intends the offer to be legally-binding and not merely a statement of intent or preliminary negotiation. Definite and Certain Terms: The offer must have definite and certain terms thatare clear, specific, and capable of being understood by the offeree. These terms may include the subject matter, price, quantity, quality, time of performance, and any other essential details. Communication: The offer must be communicated to the offeree’or brought to their attention in a reasonable manner, The offeree cannot accept an offer if they are unaware of its existence. Serious Intention: The offer must’be made with a serious intention to be bound by the terms of the contract. It should not be a joke) amere puff, or an invitation to negotiate. Not a Mere Invitation to Treat: An offer must be distinguished from a mefe invitation to treat, which is an invitation for others'to-make an offer. Examples of invitations to treat include advertisements, catalogs, and priceslists~ Acceptance of an invitation to treat does not create a contract but is Considered an offer. Revocability or Irrevocability: Unless the offer is irrevocable, the offeror generally has the power to revoke or withdraw the offer at anytime before it is accepted. However, oncé the offeree communicates their acceptarice to the offeror, the offer becomes binding.Q3. competent to contract? State the position of contracts with a minor. Competence to contract refers to the legal. capacity of an individual toenter into a binding contract. The rules regarding competence can vary depending on the jurisdiction, but generally, the following categories of people are considered competent to contract: Adults of Sound Mind: Generally, individuals who have reached the age of majority (usually 18 years or older) and are of sound mind are considered competent to contract. They are,presumed to have the legal capacity to understand and be bound by the terms of a contract. Minors: Minors, who ate individuals under the age of majority, are generally not considered fully competent to contract. Contracts entered into by minors are typically voidable, meaning the minor can choose to enforce or disaffirm the contract. This rule is based on the rationale that minors lack the necessary maturity and judgment to fully understand the consequences of their contractual obligations, Position of Contracts with a Minot When a minor enters into a’contract, the legal position of such contracts Is generally as follows’ Voidable by the Minor: A contract entered into by a minor is considered voidable at the option of the minor. This means that the minor can choose to either enforce the contract or disaffirm it, thereby avoiding their obligations under the Contract. Disaffirmance can Usually be done by the minor during their minority or within a reasonablestime after reaching the age of majority. Restitution: If a minor disaffirms a contract, they are generally required to restore the other party to the position they were in before the contract was entered into. This may involve returning any goods of property received or compensating the other party for any losses suffered Exceptions: There are certain contracts in which minors may not have the right to disaffirm. These include contracts for necessities, such aS food, clothing, and shelter, as well as contracts for educational purposes: in.such cases, the minorimay be held liable for the reasonable value of the goods or services. received. Qa. Define fraud and point outits effects on the validity of the contract, Fraud in contract law refers to a deliberatémisrepresentation of a material fact made with the intent to deceive another party, causing that party to enter into a contract to their detriment. Fraudulentmisrepresentation can have significant effects on the validity of a contract. Here’s an.explanation of fraud and.its impact on contract validity: Definition of Fraud: Fraud generally involves the following elements: False Representation; The party committing fraud makes a false representation of a material fact. This can be an affirmative statement, a concealment of information, ona failure to disclose rélevant information when there is a duty to do'so. Knowledge of Falsity: The party «aking the false representation knows that it is false or is reckless as to its truthfulness. They are aware that the representation could deceive the other party. Intent to Deceive: The party making the false representation intends to,deceive the other party and induce them to enter into'a contract based on that false representation. Reliance: The deceived party reasonably relies on the false representation and is induced to enter into the contract as ajresult. Effects on Contract Validity: Fraud can have several effects on the validity of a Contract: Contract Voidable: The contract may be considered voidable at the option of the innocent party who was deceived by the fraudulent misrepresentation, The innocent party has the right to rescind orcancel the contract. Rescission: Rescission means that the innocent party can seek to be restored to the position they were in before the contract was entered into. They can seek to undo the contract and be relieved of any obligations under it. Damages: The innocent party may also be entitled to seek damages to compensate for any losses suffered as a result of the fraudulent misrepresentation. These damages.can include direct financial losses, as well as indirect losses such as loss of opportunity or consequential damages. Defenses: Fraud caf also serve as a defense to the enforcement of the contract by the party who committed the fraud. The innocent party can raise fraud asa ground to avoid their own performance or to defend against a lawsuit seeking enforcement of the Contract. a5. Define Consideration’. Discuss various types of consideration. Consideration is a fundamental concept in contract law that refers to Something of value that is exchanged between parties in a contract. itis an essential element for the formation of a legally binding contract. Consideration can take various forms, and here are some of the types of consideration commonly recognized in contract law:‘Money: The most common form of consideration is the exchange of money or payment. When one party provides a certain amount of money in exchange for goods, services/or the fulfillment of obligations, it constitutes valid consideration. Goods or Property: Consideration can also involve the exchange of tangible goods or property) For example, if one party agrees to sell a car to another party in exchange for a certain sum of money, the car and the money would be the consideration. Services: Consideration can involve the provision of services. For instance, if oné party agrees to paint the House of another party, the painting service would be the consideration. Promise to Perform an Act: Consideration can be a promise to perform a Certain act or refrain from doing something that the party is not otherwise obligated to do. The promise itself can be considered valuable consideration. For example, if Party A promises to delivera certain product to Party B by a specific date, Party B's promise to pay for the product would-be the consideration, Forbearance: Forbearance refers to the act of refraining from doing something that one has a legal right to do. If Party A agrees not to pursue a legal claim against Party B, Party B’s promise to pay a certain amount of money or provide-something of value in return would constitute consideration. Pre-existing Legal Duty: In some situations, a promise to perform an act that one is already legally obligated to do may not be valid consideration. However, there are exceptions. For example, if there is a modification to an existing contract that benefits one party, onif there is a practical benefit conferred on one party as a result of the other party’s promise, it may still be considered valid consideration. Q6. Explain the legal rules relating to time and place of performance of a contract The legal rules relating to the time and place of performance of a contract govern when and where the parties are obligated to fulfill their contractual obligations. These rules.help establish clarity and ensure that parties understand their rights and responsibilities. Here’s an explanation of the general legal principles regarding the time and place of performance in contracts? Time of Performance: a. Time Stipulated in the Contract: The parties may specify'a particular time for performance in the contact. If a specific date or deadline is mentioned, the performance must occur within that timeframe. b, Reasonable Time: If the contract does not specify a time for performance, the law generally requires performance within a reasonable time. What is considered a reasonable time can vary depending on the nature of the contratt, the industry standards, and the specific circumstances.Place of Performance: a. Express Agreement: The parties may explicitly designate the place of performance in the contract. Ifa specific location is specified, the obligations must.be fulfilled at that place. b. Implied Agreement: in the absence of an express agreement, the law may imply a default place of performance based On the nature of the Contract or the partiés’ prior course of dealing. c. Primary Obligation Rule: The general rule is that performance must be renderedat the place specified'in the contract or agreed upon by the parties. Deviation from the agreed-upon place of performance may constitute a breach unless the parties agree to an alternative arrangement. a. Time and Place of Delivery: If the contract involves the delivery of goods or documents, the time and place of delivery’are important. The terms of the contract of trade customs may specify when and where thedelivery should occur, b. Inspection and Acceptance: The contract may specify a period for the other party to inspect the goods or services delivered and to accept or reject them. If the goods meet the required standards, the other party is typically expected to accept them, Q7. What is ‘Breach of Contract? What remedies are available to an aggrieved party on the breach of a contract? Breach of contract occurs when one party fails to fulfill its obligations as stated in a valid-and enforceable contract. It involves a violation of the terms and conditions agreed upon. by the parties. When a breach of contract occurs; the aggrieved party, or the party who has suffered harm or loss as 4 result of the breach, may seek Various remedies to address the breach. Here are some common remedies available to an aggrieved party: Damages: Damages are the most common remedy for breach of contract. The purpose of damages is to compensate the nor-breaching party for the losses they have suffered as a result of the breach. There are different types of damages available: a. Compensatory Damages: Thesé are intended to compensate the non-breaching party for the actual financial {osses they have incurred due to the breach: The goal is to put the rion-breaching party inthe same position they would have been in had the contract been fully performed. b, Consequential Damages: These are damages that go beyond the direct losses and arise from the consequences of the breach. They are awarded if the non-breaching party can demonstrate that the breaching party could have reasonably foreseen these additional}damages at the time of contracting.c. Liquidated Damages: Sometimes, contracts include a provision specifying a predetermined amount of damages to be paid in the event of a breach. These afe called liquidated damages and are enforceable if they are a reasonable estimate of the anticipated damages and not considered a penalty. Specific Performance: Specific performance is an equitable remedy available when monetary damages are inadequate to‘compensate for the harm caused by the breach. It involves a court order requiring the breaching party to fulfill their contractual obligations as originally agreed upon. Specific performance is typically granted in cases where the subject matter of the Contract is unique, such as real estate or rare goods. Rescission: Rescission invalves canceling the contract and restoring the parties to their pre-contract positions. It is an available remedy when there has been a material breach, fraud, or other vitiating factors that invalidate the contract. Rescission allows the aggrieved party to be released from any further performance under the contractand Seek restitution. Reformation: Reformation is a remedy Used when there is an error or ambiguity i the contract language that does not accurately reflect the true intent of the parties. The courbmay reform or modify the contract to correct the mistake or clarify the ambiguous terms. Injunction: In certain cifcumstances, a court may grant an injunction to prevent the breaching party from taking certain actions or to require them to perform specific obligations. Injunctions are typically used when monetary damages are insufficient to remedy the harm caused by the breach: a8. Define Partnership and describe the essential characteristics of.a partnership. Partnership refers to a type of business relationship in which two or more individuals or entities join together to carry on a business for profit. It is a form of legal association where the partners contribute resources, share responsibilities, and distribute profits and losses according to the terms agreed upon in a partnership agreement. Here are the essential characteristics of a partnership: Agreement: A partnership is formed through an agreement, either written or oral, between two or more parties. The agreement outlines the termis and conditions of the partnership, including the rights and obligations of each partner. Mutual Agency: One key characteristic of a partnership is that each partner acts as an agent of the partnership and has the authority to bind the partnership in business dealings. This means that partiiers caventer into contracts, make decisions, and act on behalf of the partnership, and their actions are legally binding on all partners. Shared Profits and Losses: Partnerships involve the sharing of profits and losses among the partners. The exact distribution method is typically outlined in the partnership agreement. Partners may agree toan equal distribution or allocate profits and losses based on the partners’ capital contributions or other agreed-upon criteria. Joint Ownership and Management: Partnerships involve joint ownership'and management of the business. All partners havelan ownership interestiin the partnership assets and share in the decision- making and management responsibilities unless otherwise specified inthe partnership agreement. Unlimited Liability: in a general partnership, partners have unlimited personal liability for the debts and obligations of the partnership. This means that if the partnership cannot cover its liabilities, the personal assets of the partners can be used to satisfy those obligations. Limited liability partnerships (LLPs) and limited partnerships (LPs) provide some level of liability protection for certain partners. Legal Status: Partnerships are distinct legal entities separate from their individual partners. However, partnerships do not-have a separate legal personality like corporations. Instead, the partnership's actions and obligations are attributed to the partners collectively. Dissolution: A partnership may be dissolved upon the occurrence of certain events, such as the expiration of fixed term, the completion of a specific project, or the mutual agreement of the partners, Dissolution can also occur due:to the death, bankruptcy, or withdrawal of a partner, or upon a court order. Qs. What do you understand by an implied authority of a partner? Describe the restrictions on the implied authority of a partner. Describe the rights and s of partners on dissolution of a firm. Implied authority of a partner refers to the authority that a partner is presumed to possess by virtue of their positionas a partner in a partnership, even if such authority is not explicitly granted in the partnership agreement. It is based on the understanding that certain powers and responsibilities are inherently associated with the partnership role. Restrictions on the implied authority of a partnercan vary depending on the terms of the partnership agreement and the laws of the jurisdiction, Here are some common restrictions placed oni the implied authority of a partner: Acts Outside the Ordinary Course of Business: Partners generally have implied authority to carry out acts that are within the ordinary course of the partnership’s business. However, if a partner wants to engage in activities outside the ordinary course of business, they may require explicit authorization from the other partners as spetified in the partnership agreement. ‘Monetary Limits: The partnership agreement may establish monetary limits on the authority of individual partners. For instance, it may fequire partners to obtain'consent from the other partners or a specific majority before committing the partnership to financial obligations above a certain threshold.Specific Restrictions: The partnership agreement can impose specific restrictions on the authority of partners based on the needs and preferences of the partners. These restrictions may include limitations on entering into contracts, making certain types of investments, or engaging in transactions with certain parties without prior consent. Decision-Making Procedures: The partnership agreement may outline decision-making procedures for important matters, requiring partners to obtain the approval'or consensus of other partners before taking ceftain actions. This can restri¢t the authority of an individual partner to.act unilaterally. Notice Requirements: The partnership agreement may require partners to provide notice to other partners before engaging in certain activities or making significant decisions. This allows other partners to have an opportunity to review and potentially object to the proposed action. Rights and lia Rights of Partners: Right to Wind Up: Upon dissolution, partners tlave the right to wind up the affairs of the partnership. This involves completing ongoing business; collecting outstanding debts, selling assets, and discharging liabilities. 9s of partners on dissolution of a firm:~ Right to Share in Assets: After the partnership's debts and.jiabilities have been settled, partners have the right to receive their share of the remaining partnership assets. The distribution is typically based on the agreed-upon sharing ratio mentioned in the partnership agreement. Right to Take Partnership Opportunities: During the winding-up process, partners may have the right to take advantage of partnership opportunities that were in progress at the time of dissolution. This right may be subject to certain conditions and the duty to account for any profits earned. bilities of Partner Liability for Existing Obligations: Partners remaih jointly and severally liable for the partnership's existing obligations and debts incurred before dissolution. This means that creditors can pursue any’partner individually for the full amount owed, regardless of the partner’s sharing ratio in the partnership. Liability for New Obligations: Partners can also be personally liable for new obligations incurred during the winding-up process if the creditors are not aware of the dissolution. It is important to provide appropriate notice of dissolution to avoid potential liabilities for new obligations. Liability for Wrongful Acts: Partners can be held personally liable for their wrongful acts or breaches of duty committed prior tovor during the dissolution. This includes acts of fraud, misrepresentation, or other violations of the partnership agreement or applicable laws.Liability for Overdrawn Accounts: If partner has withdrawn more from their capital account than they are entitled to, they may be required'to repay the excess amount to the partnership during the winding- up process: Q10. Define a contract of sale. How is a contract of sale different from an agreement to sell?Explain the essentials of valid contract of sale. ‘A contract of sale refers to an agreement between two parties, the seller and the buyer, whereby the seller agrees to transfer ownership of goods or property to the buyer in exchange fora consideration (usually money)>In a contract of sale, both parties have af immediate intention to transfer ownership; and the buyer obtains the ownership rights once the contract is executed. On the other hand, an agreement to sell is a preliminary arrangement where the seller agrees to transfer ownership of goods or property to thé buyer at a future date orupon the occurrence of certain conditions. In an agreement to sell, the ownership rights are not immediately transferred to the buyer but are contingent Upon the fulfillment of the agreed-upon conditions. Until those conditions are met, the seller retains ownership of the goods or property. The key difference between a contract of sale and an.agreement to sell lies in the timing of the transfer of ownership. In a contract of sale, ownership transfers immediately upon the execution of the contract, whereas in an agreement to Sell, ownership transfefs in the future, typically upon fulfillment of certain ‘conditions. The essentials of a valid contract of sale can vary depending on the jurisdiction and the specific laws governing the sale of goods or property. However, here até some common essentials: a. Offer and Acceptance: There must be a valid offer made by the seller, Expressing their intention to sell the goods or property, and an acceptance of that offer by the buyer. b. Mutual Consent: Both parties must freely and voluntarily agree to the terms of the contract without any undue influence, coercion, or misrepresentation. c. Consideration: The contract must involve an exchange of consideration, whichis typically the payment of a purchase price by the buyer and the transfer of ownership by the seller. Consideration is essential to make the contract legally enforceable. d. Legal Capacity: Both parties must have the legal capacity to enter,into a contract. This means they must be of legal age, mentally competent, and not under any legal disabilities. e. Legality of Object: The subject matter of the contract must be lawful. The goods or property being sold must be legalto sell, and the purpose of the contract should not be against public policy or prohibited by law.f. Certainty of Ternis:,The essential terms of the contract, such as'the description of the goods or property, the purchase price, payment terms, and delivery conditions, must be sufficiently clear and definite» g. Intention to Transfer Ownership: Both parties must have the intention to transfer ownership of the goods or property fromithe seller to the buyer: Qi. “No seller of goods.can give to the buyer a better title than he himself has”. Explain this rule. Are there any exceptions to this rule? The rule “No seller of goods cangive to the buyer a better title than he himself has” is a fundamental principle in the law of sales. It means that a seller cannot transfer a greatér or better ownership interest in goods to the buyer than what the seller actually possesses. In simpler terms, if the seller does not have a valid and clear'title to the goods, they Cannot transfer ownership and good title tothe buyer. The rule servesto protect buyers from purchasing goods fronr individuals who do not have the legal right to sell them It ensures that buyers acquire rightful owiership and protects them from claims of ownership by third parties who May have superior rightSto the goods. Exceptions to the rule “No’seller of goods can give to the buyer a better title than he himself has" may exist in certain circumstances. These exceptions include: Sales by Mercantile Agent: In some jurisdictions, if a seller acts as amercantile agent, authorized by the true owner of the gdods to sell them, the buyer may acquire a good title even if the seller does not have a valid title Thisis based on the principle that a mercantile agent, acting within the scope of their authority, can'transfer a better title to the buyer. Sales by Estoppel: Under certain circumstances, a'person may be prevented from denying the seller's authority to sell the goods based on their own ¢ohduct or representations. If a person holds themselves out as the owner or has-acted in a manner that leads the buyer to reasonably believe they have the authority to sell, the buyer may acquire a valid title, even if the person selling the goods does not actually own them. Sales in Market Overt: In some jurisdictions, if the goods aré sold openly in a mafket or public auction, and the buyer acts in good faith without knowledge of any defects in the seller's title, the buyer may acquire’a good title. This éxCeption is based on thé belief that markets provide a level of protection for buyers and create a fair environment for the transfer of goods.Qi2 Describe the general characteristics of negotiable instruments. Negotiable instruments are’specialized documents that facilitate the transfer of rights and obligations related to payment. They possess certain characteristics that make them unique and valuable in commercial transactions. Here are the general characteristics of negotiable instruments: In Writing: Negotiable instruments are typically in a written form, although certain electronic forms may also be recognized. They are written documents that contain a promise or order to pay a specific sum oF money: Unconditional Promise or Order to Pay: A negotiable instrument contains an unconditional promise or order to pay a specific sum of money. The payment obligation is not subject to any conditions or contingencies. Fixed Amount: The amount of money to-be paid is stated with certainty and is typically a fixed sum. It may be expressed in a specific currency or as a specific quantity of goods Payable to Bearer or Order: A negotiable instrument is payable to either a specific person or order, or it may be payable to the bearer. Instruments payable to a specific person of order require endorsement and transfer in order to pass ownership, while instruments payable'to:béarer can be transferred simply by delivery. Transferable by Endorsement or Delivery: Negotiable instruments are designed to be easily transferable from one party to another. They can be transferred by endorsement, which is the signature of the holderon the instrument, or by delivery, which involves physically handing over the instrument to another party. Good Faith Holder: A-petson who acquires a Negotiable instrumentin good faith and for value, without notice of any defects or claims against it, acquires a valid and enforceable title to the instrument. This characteristic enhances the negotiability and marketability of these instruments. Legal Recognition and Protection: Negotiable instruments.are recognized and protected by specific laws, such as the Uniform Commercial Code (UCC) in the United States. These laws establish rules and principles governing the creation, transfer, and enforcement of negotiable instruments. Prima Facie Evidence of Debt: A negotiable instrument is considered prima facie evidence of a debt or obligation. It serves as proof of the existerice of a legal obligation to/pay the specified amount to the holder or subsequent transferees. Presumption of Consideration: There is a legal presumption that a negotiable instrument was issued for valuable consideration. This presumption supports the enforceability of the instrument and places the burden of proving lack of consideration on the party challenging the instrument. Legal Remedies: Holders of negotiable instruments have legal remedies available to them in case of non-payment or dishonor of the instrument. These remedies may include the right to sue for the unpaid amount, seek damages, or enforce the rights against the parties liable on the instrument!Qi3. Explain the distinction between a promissory note and a bill of exchange. A promissory note and a bill of exchange aré both types of negotiable instruments, but they differ in their essential characteristics and the parties involved. Here's an explanation of the distinction between a promissory note and a bill of exchange: Promissory Note: A promissory note is a written instrument in which one party, known as the maker or issuer, makes an unconditional promise to-pay a specified sum-of money to another party, known as the payee or holder, either on-demand or at a specific future date. The key features ofa promissory note include: Promise to Pay: A promissory note contains an unconditional promise by the maker to pay a specific sum of money. Two Parties: A promissory fiote involves two parties—the maker, who rhakes the promise to pay, and the payee, who is entitled to receive the payment. Unilateral Obligation: The maker of the promissory note is solely obligated to make the payment. Payment Date: A promissory note may specify a specific date of payment or indicate that it is payable on-demand, which means it can be presented for paymentat any time. No Requirement of Acceptance: A promissory note does not require acceptance by the payee forit to be legally binding. Bill of Exchange: Abill of exchange'is also a written instrument, but it involvés three parties—the drawer, the drawee, and the payee. A bill of exchange'isan order from the drawer to the drawee, directing the drawee to pay a specified sum of moneyto the payee. The key features of a bill of exchafige include: Order to Pay: A bill of exchange contains an unconditional order fromthe drawer to the drawee, directing the drawee to pay a specific sum of money to the payee. Three Parties: A bill of exchange involves three parties—the drawer, who issues the order, the drawee, who is directed to make the payment, and the payee, who is entitled to receive the payment. Triangular Relationship: The drawer creates the bill, the drawee is obligated. to make the payment, and the payee receives the payment. Acceptance by Drawee: Abvill of exchange requires acceptance by the drawee to be legally binding. ‘Acceptance signifies the drawee’s agreement to make the payment as instructed.Negotiability: A bill of exchange is generally negotiable, which means it can be transferred to another party by endorsement or delivery. The new holder becomes the payee and can further negotiate the bill. a4. Explain the requisites of a valid negotiation made by indorsement and delivery. To have a valid negotiation of a negotiable instrument through indorsement and delivery, certain requisites must be met. Indorsement refers to the act of signing'the back of a negotiable instrument to. transfer ownership rights, and delivery involves physically handing over the instrument to another party. Here are the requisites for a valid negotiation by indorsement and delivery: Intention to Transfer Ownership: The indorser must have the intention to transfer ownership of the negotiable instrument to the indorsee. This intention is typically expressed by signing the instrument and including words of transfer, such as “pay to the order of [name].” Proper Indorsement: The indorsement must be made on the back of the instrument or on an allonge, which is a separate sheet of paper firmly affixed to the instrument. The indorsement should be signed by the indorser or their authorized representative. Identification of the Indorsee: The indorsement must identify the indorsee; the party to whom the instrument is being transferred. The indorsee can be identified by name or as a bearer, allowing Subsequent transfer to anyone who possesses the instrument. Delivery of the instrument: Physical delivery of the instrument must take place. The indorser must hand over the actual possession of the instrument to the indorsee or someone authorized to receive it on their behalf. Complete Negotiation: The negotiation by indorsement and delivery must be complete, meaning that all necessary steps have been taken to transfér ownership. It should be.clear and unambiguous that the indorser intends to'transfer the rights to the indorsee. Good Faith and Without Notice: The indorsee must acquire the instrument in good faith and without notice of any defects, claims, or adverse interests that could affect their rights. Good faith means that the indorsee acquires the instrument honestly and without fraudulent intent. Compliance with Legal Requirements: The negotiation by indorsement and:delivery must comply with the legal requirements of the jurisdiction where the instrument is governed. This includes adhering to ‘any specific formalities or procedures prescribed by law.