NEGOTIABLE INSTRUMENTS ACT ² GROUP 5

By: Shabir Hameed Anitha Kunjachan Revathy Prakash Naveen K. D. Srikanth Nair

NEGOTIABLE INSTRUMENT 

Negotiable instrument is one, the legal title of which can be transferred by mere delivery or endorsement and delivery. 

Here change in ownership can take place with ease and without any formality. 

If the transferee has accepted the negotiable instrument in good faith then he is not affected by the defective title of the transferor in any way. The three negotiable instruments are promissory note, bill of exchange, and cheques payable

Negotiable Instruments Act of 1881 

In India they are governed by Negotiable Instruments Act of 1881 

Sec 13 of N.I Act states that, negotiable instrument means promissory note ,bill of exchange or cheque payable either to order or to bearer.

Features 
    

Free transfer Transfer free from defects It must be in writing It must be duly signed Delivery of the instrument is essential The payee must be a certain person

TYPE OF NEGOTIABLE INSTRUMENTS 

PROMISSORY NOTE BILL OF EXCHANGE CHEQUE  

PROMISSORY NOTE
Sec 4 of the N.I : Act defines a Promissory Note as ³an instrument in writing (not being a bank note a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument³

BILL OF EXCHANGE
An a unconditional or order issued which by person business directs

the recipient to pay a fixed sum of money to a third party at a future date. The future date may be either fixed or negotiable.

A bill of exchange must be in writing and signed and dated, also called draft.

Three Parties In Bill Of Exchange 

DRAWER - The maker of a bill of exchange or cheque is called the ³drawer´. DRAWEE OR ACCEPTOR The person thereby directed to pay is called the ³drawee´. PAYEE - The person to whom the amount is payable .  

CHEQUE
A cheque is a special type of Bill of Exchange. It is drawn on banker and is required to be made payable on demand.

Features of Promissory Notes 
      

In writing Unconditional order/promise Drawn on a certain person Certain sum of money Payee to be certain Payable on demand or after a certain date Signed by the drawer/maker Delivery essential

CLASSIFICATION OF NEGOTIABLE INSTRUMENTS 
      

Bearer vs Order instruments Inland vs Foreign Instruments Demand vs Future Time Instruments Clean vs Ambiguous Instruments Complete vs Inchoate Instruments Clean vs Documentary Instruments Trade vs Accommodation Bill Fictitious vs Escrow Bill

SPECIAL PARTIES TO A NEGOTIABLE INSTRUMENT
‡  

Drawee in case of need Acceptor for honour supra protest Holder and holder in due course

Important terms 
 

Negotiation back: Damages Redraft

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