Characteristics of negotiable instrument act

[BOE/PN/CHEQUE]

1. Writing and signed

2. Consideration
3. Transfer by delivery
4. Bona fide transfer
5. Unconditional
6. Certain amount
7. Certain person
8. Order to pay money only

1. writing and signed

a. An instrument which is in writing and authenticated by
signature of a specific person is only effective instrument
b. A oral instrument or a promise or a undertaking without a
signature will not be upheld in the court of law.
2. Consideration
a. Instrument is dependent on specific presumption of “No
Consideration No Contract”.
b. It is the presumption of the law if there is an instrument it is
against consideration.
c. However, the person can also prove that instrument
obtained by means of fraud, undue influence and unlawful
consideration where it will be invalid.
3. Transfer by delivery

A title of negotiable instrument can be transferred from one

person to another by mere delivery as it is the document of title

a. In short the negotiable instrument is a bearer instrument

that one who have the possession will have the ownership.
4. Bona fide transfer
a. The transferee who takes the instrument in a good faith and
for valuable consideration is a bona fide transferee
b. Bona fide means if transferee holds the instrument in good
faith all the previous defects will be nullified and transferee
have a title to claim.
5. Unconditional instrument
a. An instrument which is conditional is void except for
universal truth and certain things
Ex 1. Mr. Salman promises to pay Mr. Abhi Rs.10cr if Mr.
Abhi goes abroad for a specific contract

 This is invalid contract

Ex 2. Mr. Motabhai promises to pay Mr. Mitron Rs.

15 lakhs on the death of Mr. Daud

 This is a valid instrument as condition is certain

Regarding death
6. Certain amount
a. Amount for of instrument is certain or capable of being
made certain.

Ex. Miss. Aliya promises to pay Rs. 10 lakh + 10% interest after 6
months to 9 months here 10% of interest is not certain but it is
capable of being made certain.

7. Certain person
a. All the person to an instrument must be certain including
endorsee
b. It the persons are fictitious then the instrument is null and
void.

Ex. Mr. Shahid accepted the instrument from Mr. Taimur and
give it to Miss. Karina

And if Mr. Taimur is fictitious then instrument is also fictitious

and void

8. Order to pay money and money only.

a. An instrument cannot be created or accepted for
consideration other than money. It should signify money and
money’s worth only.

For ex. Mr. A promises to give 100 liters of oil to Mr. B through
promissory note is invalid instrument