W ha t is N e g o t ia b le

In s tr u m e n ts ?
 The term negotiable instruments means a written document
which entitles a person to a sum of money.

 A negotiable instruments is transferable by delivery or by

endorsement and delivery.

 The transfer entitles a person to the sum of money mentioned

therein.

 “Thus the negotiable instrument is a document which is

legally recognized by custom of trade or law, transferable by
delivery or by endorsement and delivery.”
 Characteristics Of a Negotiable Instrument
 Freely transferable: The property in a negotiable instrument passes from one
person to another by a simple process, i.e., by mere delivery if it is payable to
bearer, and by endorsement and delivery if it is payable to order.

 Holder’s title free from all defects: The holder in due course (one who
acquires the instrument in good faith and for consideration) gets it free from all
defects.

 Recovery: One can sue upon the instrument in his own name.

 Payable to order or bearer: - It must be payable either to order or bearer

 Presumption as to Holder:- Every holder of negotiable instrument is presumed

to be holder in due course.

 Presumption as to considerations:- Every negotiable instrument is presumed to

have been made, drawn, accepted, endorsed , negotiated or transferred for
consideration.
 Types of Negotiable Instruments

 Promissory note.

 Bill of exchange.

 Cheque.
Promissory note.

A promissory note is an instrument in

writing 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 instrument.
 Parties

 MAKER : The person who makes the promissory note and promises to
pay is called the Maker.

 PAYEE: The person to whom the payment is to be made is called the

Payee.

 HOLDER: The holder is either the payee or someone to whom he may

have indorsed (transfer) the note is known as Holder.

 ENDORSER: The person who indorses the note to another is called the
Endorser .

 ENDORSEE: The person to whose favor the note is endorsed is called

the Endorsee
Essentials Of The Promissory Notes

 It must be in writing.

 It must contain a promise or undertaking to

pay a definite sum of money.

 The promise to pay must be unconditional.

 It must be signed by the maker.

 The payee must be identified & must be

certain.

 The sum payable must be certain.

 F o r m a t O f P r o m i s s or y
N o te

Rs. 10,000/- Delhi, February10,2012

Three months after date I promise to pay Rajesh on

order the sum of ten thousand rupees, for value received.
To,
Rajesh Stamp
222, Ashok Vihar
Sd/-Ram
Delhi-110052
 Bill Of Exchange
A bill of exchange is an instrument in writing containing an
unconditional order signed by the maker, directing a certain
person to pay a certain sum of money only to, or to the order
of certain person to the bearer of the instrument.
 Parties

 DRAWER: The person who makes the bill of exchange is called

drawer.

 DRAWEE: The person who is directed to pay is called drawee.

 PAYEE: The person to whom the payment is to be made is called

payee.

 ACCEPTOR: When the drawee accepts the bill is called acceptor.

 The amount payable must be certain.

 The payment must be made in money.

 The bill payable may be either on demand or after a specified

period.

 The bill may be payable either to the bearer or to the order of

payee.
 Format Of Bill Of Exchange

Rs. 500 Greater Noida,21 Feb.2009

Three months after the date pay to Ram or order the sum of Five Hundred
rupees , for value received.
To,
rakesh
235,Subhash marg
delhi-110006.
Stamp
In case of need with Accepted
Krishna
Canara Bank, Delhi rakesh Sd/-
 Cheque
A cheque is a bill of exchange drawn on a specified banker
and expressed to be payable otherwise than on demand.

The maker of a bill of exchange or Cheque is called the

“Drawer"; the person thereby directed to pay is called the
"Drawee".
 Parties
 DRAWER: The person who makes a cheque is called
Drawer.

 DRAWEE: The person who is directed to pay is called

Drawee.

 PAYEE: The person to whom the payment is to be made.

 In writing

 Express order to pay

 Definite and unconditional order

 Signed by drawer

 Order to pay certain amount

 Payable on demand
 Fo r m a t O f C h e q u e

No.……..
Date………..2010

Pay…………………………………………………………or bearer
the sum of Rs…………………………………

Rs…………………
A/c No LF No Sd/-
PUNJAB NATIONAL BANK
Subzi Mandi,Delhi -110007

“5777100” 111013035”
 Presentment

 Presentment for Acceptance (required only in

case of BOE)

 Presentment for payment

 Presentment made to the drawee.

 Must be made before the date of maturity

 Dishonor

A negotiable instrument is said to be dishonored by non-

payment when the maker, acceptor or drawee, as the case
maybe makes default in payment upon being duly required
to pay the same.

 Dishonor by non payment

 Dishonor by non acceptance