DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : Dr. BYRI PRABHAKAR
Designation : Senior Lecturer
Branch : D.C.C.P
Institute : SRRS Govt. Polytechnic,
Sircilla
Year/Semester : V Semester
Subject : BANKING – I
Subject Code : CCP504(B)
Topic : NEGOTIABLE INSTRUMENTS
Duration : 50 Mts
Sub Topic : Features of Negotiable Instruments
Teaching aids : PPT, ANIMATIONS
CCP504B.52 1
Objectives :

On completion of this period, you would be able to

understand:

 Features of Negotiable Instruments

 Exceptional cases of Negotiable Instruments

CCP504B.52 2
Recap :

In the previous session we have learnt about the

meaning and types of Negotiable Instruments.

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Structure :
 Features of Negotiable Instruments
 Contract to pay
 Title
 Recovery of money / right to sue
 Evidence / Presumption
 Summary
 Quiz
 Frequently Asked Questions
 Assignment
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Known to Unknown :

 Do you know what are the requirements for

preparation of Negotiable Instruments?

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 Essential Features of
Negotiable Instruments

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Features of Negotiable Instruments

The features of Negotiable Instruments are:

 Contract to pay money

 Transferability
 Title
 Recovery of money / Right to sue
 Evidence / presumption

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Features of Negotiable Instruments

 Instrument in Writing
 Unconditional Order / Promise
 The amount must be certain
 Payable to order / bearer
 No notice of transfer
 Credit of the party

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Contract to Pay Money :

A Negotiable Instrument contains a contract to

pay money only

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Transferability :

 The value in Negotiable Instrument is easily

transferable from person to person.
 The property in the Instrument can be
transferred in two ways.
 by mere delivery (bearer)
 by endorsement and delivery (order)

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Title :

 This is most important feature of Negotiable

Instrument.
 A Negotiable Instrument confers absolute and
good title on the transferee, who takes in good
faith, for value and without notice of defective title
of the transferor.

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The General Rule is that

 “The transferor can not transfer a title better

than what he has”

Is an exception to the Negotiable Instruments

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Recovery of Money/Right to Sue :

 The holder in due course in no way affected by

the defective title of the
 Transferor or
 Any of the previous parties
 He has a right to sue in his own name

CCP504B.52 13
Evidence / Presumptions :

 Section 118 and 119 of N.I. Act deal with certain

Presumptions.
 It is presumed that the Instrument has been
always obtained for consideration.
 Negotiable Instrument is capable of easy proof
and got special rules of evidence.

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Instrument in Writing :

 The law requires that a Negotiable Instrument i.e.

 A Cheque
 Bills of Exchange
 Promissory Note
 Must be in writing

CCP504B.52 15
Unconditional Order / Promise :

 A cheque/bill of exchange contains an order to

the drawee to pay money without attaching any
condition.
 A Promissory Note contains an Unconditional
promise to pay money to the creditor.

CCP504B.52 16
Amount must be Certain :

 The amount to be paid on the Instrument must

be certain and specified both in

 Figures (Rs.1000/-) and

 Words (Rupees One Thousand only)

CCP504B.52 17
Payable to Order or Bearer :

 The Negotiable Instruments are normally

payable to order.
 They are payable to the bearer
 If it is expressed to be so payable or
 If the last endorsement is a blank
endorsement.

CCP504B.52 18
No Notice of the Transfer :

 The Transferor can simple transfer the Negotiable

Instruments.
 He need not serve any notice of transfer to the
party who is liable on the instrument to pay.

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Credit of the Party :

 The credit of the party who signs the

instrument is pledged to the Instrument.
 Therefore, such Instruments will never be
dishonoured normally.

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Exceptional Cases of Negotiable
Instruments :

 The drawer or any holder of a Negotiable

Instrument can take away the ‘negotiable
quality’ of the instrument by means of
 Drawing a cheque payable only to the order
of a certain person.
 Crossing it “Not negotiable” or “A/c Payee”.

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Summary :

In this period, we have discussed

 The features of The Negotiable Instruments (N.I.)

 The exceptional cases of Negotiable instruments.

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Quiz :

1. The property in the Negotiable Instrument

can be transferred by
a) Mere delivery
b) Endorsement and delivery
c) By both (a) and (b)
d) None of above

CCP504B.52 23
Quiz :
2. Which section of the N.I. Act deal with certain
presumptions regarding the Instruments
a) Section 118 and 119
b) Section 136 and 137
c) Section 13 and 14
d) Section 88 and 89

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Quiz :
3. Exceptional cases of N.I. is applicable to only
a) A cheque
b) Bill of Exchange
c) Promissory note
d) All of the above

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Frequently Asked Questions :

1. Explain any two features of Negotiable

Instruments.
2. Mention exceptional cases of Negotiable
Instruments.

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Assignment :

1. Explain the Features of Negotiable

Instruments.

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