different between Bill of Exchange , pomissory note and cheque in table

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Criteria Bill of Exchange Promissory Note Cheque

An order to pay a certain A written promise to pay a A written order to a bank

amount of money from one certain amount of money to pay a certain amount of
person to another on a from one person to another money from one person to
Definition specified date. on a specified date. another.

Parties Drawer, drawee bank, and

involved Drawer, drawee, and payee Maker and payee payee

Payment date Specified in the document Specified in the document Payment upon presentation

Can be short term or long Can be short term or long

Maturity term Usually short term term

The drawee has to accept

the bill of exchange to
Acceptance make it valid. No acceptance required. No acceptance required.

The drawer and the The drawer is liable to pay

endorsers are liable to pay The maker is liable to pay the amount on the due
Liability the amount on the due date. the amount on the due date. date.

Can be transferred by Can be transferred by Can be transferred by

Transferability endorsement endorsement endorsement

Used in international trade Used for short-term Used for making payments
Usage and commerce. borrowing and lending. and settling debts.
competence সক্ষমতা of parties to negotiable instrument Minor, lunatics,insolvent, joint stock
company,partnership farm,agent, legal representive
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The competence of parties to negotiable instruments may vary depending on the type of party
involved. Here are some general guidelines:

1. Minors: Generally, minors (individuals under the age of 18) are not legally competent to enter
into contracts, including negotiable instruments. However, there are some exceptions to this
rule. For example, if the minor has been emancipated or is acting on behalf of a business,
they may be considered competent to enter into certain types of contracts.
2. Lunatics: A lunatic, or someone who is legally declared insane or mentally incompetent, may
not be competent to enter into a negotiable instrument. If the person has a legal guardian,
the guardian may be authorized to enter into contracts on their behalf.
3. Insolvent: Insolvency refers to a person or company's inability to pay debts as they become
due. Insolvent parties may be competent to enter into negotiable instruments, but if they
default on the instrument, their creditors may have legal recourse.
4. Joint stock company: A joint stock company is a type of business entity that is owned by
shareholders. Generally, joint stock companies are competent to enter into negotiable
instruments on their own behalf.
5. Partnership firm: A partnership is a business entity owned by two or more people.
Partnerships may be competent to enter into negotiable instruments, but the specific rules
may depend on the partnership agreement.
6. Agent: An agent is a person authorized to act on behalf of another person or entity. If the
agent has been given the authority to enter into negotiable instruments, they may be
competent to do so.
7. Legal representative: A legal representative, such as an executor or administrator of an estate,
may be competent to enter into negotiable instruments on behalf of the estate or the person
they are representing.
liability of a parties to a negotiable instrument

The liability of a party to a negotiable instrument, such as a promissory note or a bill of exchange,
may depend on the nature of their involvement with the instrument. Here are some general
principles of liability for parties to negotiable instruments:

1. Maker or drawer: The maker of a promissory note or the drawer of a bill of exchange is
primarily liable for payment of the instrument. This means that if the instrument is not paid,
the maker or drawer is legally obligated to pay it.
2. Payee: The payee of a negotiable instrument is generally not liable for payment. However, if
the payee endorses the instrument to a third party, they may become liable for payment as
an endorser.
3. Endorser: An endorser is a party who signs the back of a negotiable instrument, either for the
purpose of transferring ownership or for the purpose of guaranteeing payment. An endorser
may be liable for payment if the instrument is not paid, either to subsequent endorsers or to
the holder of the instrument.
 4. Acceptor: The acceptor of a bill of exchange is a party who agrees to pay the bill at a later
date. The acceptor is primarily liable for payment of the instrument, along with the maker or
drawer.
5. Accommodation party: An accommodation party is a party who signs a negotiable
instrument for the purpose of lending their credit to another party. An accommodation party
is generally liable for payment if the other party fails to pay the instrument.
6. Agent: An agent who signs a negotiable instrument on behalf of their principal may not be
personally liable for payment, unless they sign the instrument in their own name rather than
on behalf of their principal.

It's important to note that the specific rules of liability for negotiable instruments may vary
depending on the jurisdiction and the specific circumstances of the instrument.

kinds of negotioable endorsement only easy defenation like blank, speacal, partial, restrictive,
condition(san recourse, facultative, sans frais)
Negotiable endorsements are written amendments made to a negotiable instrument, such as a check
or promissory note, that alter the terms of the original instrument. There are several types of
negotiable endorsements, including:

1. Blank endorsement: A blank endorsement involves signing the back of the instrument
without specifying any particular endorsee, thus making it payable to the bearer. This type of
endorsement is the simplest and most flexible, as it allows the holder of the instrument to
negotiate it freely.
2. Special endorsement: A special endorsement specifies the person to whom the instrument is
payable, making it non-negotiable. The endorsement must include the name of the endorsee
and may also include instructions as to how the funds should be applied.
3. Partial endorsement: A partial endorsement involves endorsing only part of the instrument's
value. For example, a check for $1,000 could be partially endorsed for $500, leaving the
remaining $500 payable to the original payee.
4. Restrictive endorsement: A restrictive endorsement limits the negotiability of the instrument
in some way. For example, an endorsement that says "For deposit only" restricts the funds to
be deposited into a particular account.
5. Conditional endorsement: A conditional endorsement makes the endorsement contingent
upon the occurrence of a certain event. For example, an endorsement that says "Pay to John
Smith if he delivers the goods by May 1" is a conditional endorsement.
 sans recourse : sans recourse endorsement means that the endorser is not liable if
the instrument is dishonored.
 Facultative endorsement: sans recourse endorsement means that the endorser is
liable if the instrument is dishonored.
 Endorsement sans frais: is typically used to indicate that the endorser will not
charge any fees to the endorsee for the transfer of the instrument

1.
a.Define "Negotiable Instrument". What are the main characteristics of negotiable instrument?
b.When a bill of exchange is taken as dishonored by non-acceptance?
a. A negotiable instrument is a written document that represents a legally binding agreement
between parties, allowing for the transfer of a right or payment from one party to another. The main
characteristics of negotiable instruments are transferability and negotiability, which means they can
be bought, sold, or exchanged for value, and the transferee acquires the same rights and obligations
as the transferor. Negotiable instruments must also be in writing, signed by the maker or drawer, and
contain an unconditional promise or order to pay a fixed amount of money.

b. When a bill of exchange is dishonored by non-acceptance, it means that the drawee (the person or
entity who is ordered to pay) has refused to accept the bill. This can happen for various reasons, such
as insufficient funds, an irregularity in the bill, or a dispute between the parties. When a bill is
dishonored, the holder (the person who is entitled to receive payment) can take legal action against
the drawer (the person who issued the bill) to recover the amount due.

2. When banks held liable for deficiency in service? What are the consequences of wrongful
dishonor of cheque? b. Explain the rights of general lien for banker. What are the properties in which
banker does not have right of lien? C. A banker sends for collection, a bill lodged by a customer to a
bank in the place in another country on which the bill drawn. The bank in another country collects
the bill, but before remitting the proceeds, fails. Who loses the money? Banker or the customer?
a. Banks can be held liable for deficiency in service in situations where they fail to fulfill their
obligations towards their customers. For example, if a customer's account is debited with an incorrect
amount or if the bank fails to honor a valid cheque, the bank can be held liable for deficiency in
service. The consequences of wrongful dishonor of a cheque can be severe, as it can lead to financial
losses and damage to the reputation of the customer. The customer can take legal action against the
bank for wrongful dishonor of a cheque and claim damages.

b. The right of general lien for a banker is the right to retain any property or asset belonging to a
customer until the customer's debt is fully paid. This right is available to bankers to ensure the
security of their loans and to recover any outstanding debts. However, this right is not absolute, and
there are certain properties in which a banker does not have the right of lien. These include:

 Documents of title that are essential for the customer's business or profession, such as bills
of lading, warehouse receipts, and share certificates.
 Goods deposited for safe custody or pledged as security for a loan.
 Items held in safe deposit lockers.

c. In this scenario, the customer would be the one to lose the money. When a banker sends a bill for
collection to a bank in another country, the banker acts as an agent of the customer. The bank in
another country collects the bill on behalf of the customer and holds the funds until they are
remitted to the banker. However, if the bank in another country fails before remitting the proceeds,
the customer bears the risk of loss. The banker is only responsible for the due diligence in selecting
the correspondent bank, and if the selection was prudent, the banker will not be liable.
4. a. State the main objective of crossing a cheque. Who can cross it? Who can ? cancel the crossing
and how? b. 'A banker's obligation to honour cheques drawn by his customers is not absolute'.
Discuss. C. What are the consequences of the wrongful dishonor of a cheque?
a. The main objective of crossing a cheque is to provide an additional layer of security and prevent
fraud. When a cheque is crossed, it cannot be encashed at the counter and can only be deposited
into a bank account. The person who can cross a cheque is the account holder or the drawer of the
cheque. The crossing can be canceled by the account holder by writing the words "account payee
only" or "not negotiable" on the cheque. This can also be done by the payee with the permission of
the account holder. To cancel the crossing, the account holder or payee can simply draw two parallel
lines on the cheque and write "pay cash" or "not crossed" between the lines.

b. A banker's obligation to honor cheques drawn by his customers is not absolute. The banker has a
duty to verify the authenticity of the signature on the cheque and ensure that there are sufficient
funds in the account to cover the amount of the cheque. If the signature is not genuine or the
account does not have sufficient funds, the banker has the right to dishonor the cheque. In addition,
the banker can refuse to honor a cheque if there is a court order or notice of stop payment issued by
the account holder.

c. The wrongful dishonor of a cheque can have serious consequences for both the bank and the
customer. The customer can suffer financial losses and damage to their reputation, while the bank
may face legal action and damage to its reputation. The consequences can include:

 The customer may lose a business opportunity or face additional costs due to the delay in
payment.
 The customer may suffer damage to their credit score or face legal action from the payee.
 The bank may be liable for damages, including the amount of the cheque, interest, and
compensation for any loss suffered by the customer due to the wrongful dishonor.
 The bank may face regulatory action or damage to its reputation, which can impact its ability
to attract customers and maintain its business operations.
5. a.Define negotiable instruments, describe the types and explain the essential characteristics of
negotiable instruments? b.What are the differences between bills of exchange and promissory notes?
c.Explain the competence of a minor and a joint stock company to become parties of negotiable
instruments.
a. Negotiable instruments are written documents that facilitate the transfer of a certain amount of
money from one person to another. The types of negotiable instruments include promissory notes,
bills of exchange, and cheques. The essential characteristics of negotiable instruments are:

 Transferability: The instrument can be transferred from one person to another by delivery or
endorsement.
 Negotiability: The holder of the instrument can transfer it to another person, who becomes a
holder in due course and takes the instrument free of any defects or claims.
 Payable to order or bearer: The instrument is payable to the order of a particular person or to
the bearer of the instrument.
  Unconditional promise to pay: The instrument contains an unconditional promise to pay a
certain amount of money.
 In writing: The instrument is in writing and signed by the maker or drawer.

b. The main differences between bills of exchange and promissory notes are:

 Parties: A bill of exchange involves three parties, the drawer, the drawee, and the payee, while
a promissory note involves only two parties, the maker and the payee.
 Acceptance: A bill of exchange requires acceptance by the drawee, while a promissory note
does not require acceptance.
 Time of payment: A bill of exchange is payable after a certain period of time, while a
promissory note is payable on demand or at a fixed date.
 Usage: Bills of exchange are commonly used in commercial transactions, while promissory
notes are commonly used in personal transactions.

c. A minor (a person below the age of 18) is not competent to enter into a contract, including
negotiable instruments. Therefore, any contract or negotiable instrument signed by a minor is
voidable at the option of the minor. On the other hand, a joint-stock company is a legal entity with
the capacity to enter into contracts and become a party to negotiable instruments. The company can
sign the instrument through its authorized officers, and the liability for the payment of the
instrument rests with the company.
6. a.Distinguish between a bill of exchange and a chequec) What sorts of precautions should be
taken as a paying banker in both honoring and dishonour cheques?
a. A bill of exchange and a cheque are both types of negotiable instruments but have some
differences. A bill of exchange is an instrument used to transfer funds from one party to another
party in a trade transaction. It involves three parties, the drawer, the drawee, and the payee, and is
usually payable after a certain period of time. A cheque, on the other hand, is an instrument used to
transfer funds from one person to another for making payments. It involves three parties, the
drawer,drawee bank and the payee, and is payable on demand.

c. As a paying banker, certain precautions should be taken while honoring or dishonoring cheques.
These include:

 Verifying the signature of the drawer: The paying banker should verify that the signature on
the cheque matches the signature on record.
 Verifying the balance in the account: The paying banker should verify that there are sufficient
funds in the account to cover the amount of the cheque.
 Checking for stop payment orders: The paying banker should check if there is a notice of
stop payment issued by the account holder.
 Checking for irregularities: The paying banker should check for any irregularities or
alterations in the cheque, such as overwriting or erasing.
 Maintaining proper records: The paying banker should maintain proper records of all
transactions, including cheques honored and dishonored, to avoid any legal disputes.
stale cheque is a cheque that is presented for payment after a certain period of time
from the date of issue. In India, a cheque is considered stale if it is presented for
payment after three months from the date of issue. The paying banker should take
certain precautions regarding the date, such as:

 Verifying the date: The paying banker should verify the date of the cheque and
ensure that it is not stale.
 Scrutinizing the cheque: The paying banker should scrutinize the cheque for any
alterations or irregularities, especially in the date.
 Seeking clarification: If there is any ambiguity or doubt regarding the date of the
cheque, the paying banker should seek clarification from the drawer of the
cheque.
 Maintaining proper records: The paying banker should maintain proper records
of all transactions, including stale cheques, to avoid any legal disputes.
type of crossing chaque general crossing,special crossing,restrictive crossing

Crossing refers to the process of drawing two parallel lines across the face of a check or other
negotiable instrument. This is done for security purposes and to indicate how the check should be
processed by the bank. There are three main types of crossing:

1. General crossing: In a general crossing, the check is crossed with two parallel lines, but no
words or other symbols are added. This indicates that the check can only be deposited into a
bank account, and not cashed over the counter. The bank may further process the check by
either clearing it through the clearinghouse or sending it to the payee's bank for collection.
2. Special crossing: In a special crossing, the check is crossed with two parallel lines, and the
name of a particular bank or banker is added between the lines. This indicates that the check
can only be deposited into the account of the named bank or banker, and not into any other
bank account. This is often used for large payments or to ensure that the check is only
deposited with a particular bank.
3. Restrictive crossing: In a restrictive crossing, the check is crossed with two parallel lines, and
the words "account payee only" or similar language are added. This indicates that the check
can only be deposited into the account of the named payee, and not into any other bank
account. This is often used to prevent the check from being stolen or fraudulently altered,
and to ensure that the payment goes to the intended recipient.
precaution to be taken by a paying banker? why may a banker refuse to honour a customer chaque?

As a paying banker, there are several precautions that should be taken to ensure that each check or
customer's payment order is honored correctly and securely. Here are some common precautions:

1. Verify the signature: The banker should verify the signature on the check or payment order to
ensure that it matches the signature on file for the account holder.
2. Check for alterations: The banker should carefully examine the check or payment order for
any signs of alteration, such as erased or overwritten information.
 3. Check the amount: The banker should verify that the amount on the check or payment order
matches the amount that the account holder is authorized to withdraw.
4. Check the date: The banker should verify that the check or payment order is not stale or
post-dated, and that it is presented for payment within the appropriate timeframe.
5. Check the available funds: The banker should check the account balance and ensure that
there are sufficient funds to cover the payment.

If the banker determines that there are discrepancies or concerns with the check or payment order,
they may refuse to honor it. Here are some common reasons why a banker may refuse to honor a
customer's check or payment order:

1. Insufficient funds: If the account holder does not have enough funds in their account to cover
the payment, the banker may refuse to honor the check.
2. Stop payment order: If the account holder has issued a stop payment order on the check or
payment order, the banker may not honor it.
3. Discrepancies: If there are discrepancies or irregularities with the check or payment order,
such as a missing signature or altered information, the banker may refuse to honor it.
4. Legal restrictions: If the payment is prohibited by law or if there are legal proceedings against
the account holder, the banker may refuse to honor the check.

It's important for the banker to follow proper procedures and guidelines to ensure that each
payment is processed accurately and securely, while also protecting the bank from potential fraud or
legal issues
Bankers liability in case reply is not appropriate
As a general rule, a banker who pays a check or a customer's payment order is liable for any loss
suffered by the account holder as a result of the payment. This includes situations where the reply to
the customer's payment order is not appropriate, and the account holder suffers a loss as a result.

For example, if a customer submits a payment order to their bank with specific instructions, and the
bank does not follow those instructions or makes an error in processing the payment, resulting in a
loss to the customer, the bank may be liable for that loss.

In such cases, the account holder may be able to seek legal recourse against the bank to recover
their losses. The bank may also face regulatory penalties or fines for failing to follow proper
procedures or guidelines in processing payments.

It's important for bankers to ensure that they have proper procedures in place for processing
payments, including verifying signatures, checking for sufficient funds, and following any special
instructions or restrictions provided by the account holder. This can help to minimize the risk of
errors or losses, and can help to protect the bank from liability in case of any disputes or issues with
payments.