LAW OF NEGOTIABLE INSTRUMENT-part2

8/7/2019 LAW OF NEGOTIABLE INSTRUMENT-part2

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LAW OF NEGOTIABLELAW OF NEGOTIABLEINSTRUMENTINSTRUMENT

Prepared byPrepared by

T.visalaksheeyT.visalaksheey


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IndorsementIndorsement

An indorsement is a negotiable instrument, suchAn indorsement is a negotiable instrument, suchas a check or a promissory note, has the effect ofas a check or a promissory note, has the effect of

transferring all the rights represented by thetransferring all the rights represented by theinstrument to another individual.instrument to another individual.


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The Endorser the person who endorses the

note in favour of another person.b. The Endorsee the person in whose favour

the note is negotiated by endorsement.

Kinds of IndorsementKinds of Indorsement

Indorsement in BlankIndorsement in Blank-- Endorser puts his signatureEndorser puts his signature

without specifying the endorsee.without specifying the endorsee.


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Indorsement in FullIndorsement in Full--Along with the endorsersAlong with the endorsers

signature,the name of the endorsee is specified.signature,the name of the endorsee is specified.

Restrictive IndorsementRestrictive Indorsement--A endorsement isA endorsement isrestrictive which prohibits the further negotiationrestrictive which prohibits the further negotiationof a negotiable instrument.of a negotiable instrument.


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Conditional Indorsement: Transfer of property in aConditional Indorsement: Transfer of property in anegotiable instrument from endorser to endorsee.negotiable instrument from endorser to endorsee.

Eg: where endorsement states, pay x if he reaches Delhi.Eg: where endorsement states, pay x if he reaches Delhi.

So X can claim the payment on instrument only if heSo X can claim the payment on instrument only if hereaches delhireaches delhi


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Indorsement sans recourse: A endorser of a negotiableIndorsement sans recourse: A endorser of a negotiable

instrument may, by express words in the endorsementinstrument may, by express words in the endorsementexclude his own liability.exclude his own liability.

E.g: Where x endorses a cheque as pay y or orderE.g: Where x endorses a cheque as pay y or orderwithout recourse to me ,X will not be liable on thewithout recourse to me ,X will not be liable on the

instrument if it is dishonoured.instrument if it is dishonoured.

Partial IndorsementPartial Indorsement-- Negotiable instrument is endorsed forNegotiable instrument is endorsed forpart of the amountpart of the amount


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PRESENTMENTPRESENTMENT

Presentment of a negotiable instrument is madePresentment of a negotiable instrument is madefor two purposes.for two purposes.

1.1. Presentment for acceptancePresentment for acceptance -- It is only bills ofIt is only bills ofexchange that require presentment for acceptanceexchange that require presentment for acceptanceand that too not all but certain kind of bills only.and that too not all but certain kind of bills only.Bill payable on demand or on a fixed date needBill payable on demand or on a fixed date neednot be presented for acceptance.not be presented for acceptance.


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2.2. Presentment for paymentPresentment for payment -- A negotiableA negotiableinstrument must be presented for payment to theinstrument must be presented for payment to themaker, acceptor or drawee,by the holder.maker, acceptor or drawee,by the holder.


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NOTINGNOTING

Noting is a convenient method of authenticating the fact ofNoting is a convenient method of authenticating the fact ofdishonour. Where an instrument is dishonoured, thedishonour. Where an instrument is dishonoured, theholder, besides giving the notice as referred to above,holder, besides giving the notice as referred to above,should get the bill 'noted' by the notary public.should get the bill 'noted' by the notary public.

The notary public presents the instrument, notes down inThe notary public presents the instrument, notes down inhis register date of its dishonour and the reason, if any,his register date of its dishonour and the reason, if any,given by the acceptor.given by the acceptor.


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PROTESTINGPROTESTING

The protest is the formal notarial certificate attesting theThe protest is the formal notarial certificate attesting the

dishonour of the bill and based upon the noting. After thedishonour of the bill and based upon the noting. After thenoting has been made, the formal protest may be drawnnoting has been made, the formal protest may be drawnup by the notary at his leisure. When the protest is drawnup by the notary at his leisure. When the protest is drawnup it relates back to the date of noting.up it relates back to the date of noting.


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A protest to be valid must contain the following particulars:A protest to be valid must contain the following particulars:

1.1. The instrument itself.The instrument itself.

2.2. The names of the parties against whom the instrumentThe names of the parties against whom the instrumentis protested.is protested.

3.3. The fact and reason/reasons for dishonour.The fact and reason/reasons for dishonour.

4.4. Place and time of dishonourPlace and time of dishonour

5.5. Signature of the notary public.Signature of the notary public.


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5.8 THE PAYING BANKER5.8 THE PAYING BANKER

The 'paying banker' is a term used to denote theThe 'paying banker' is a term used to denote the

position and duties of the draweeposition and duties of the drawee--banks in payingbanks in payingcheques of their customers. Thus, 'paying banker'cheques of their customers. Thus, 'paying banker'is a banker upon whom a cheque is drawn.is a banker upon whom a cheque is drawn.


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Payment in due coursePayment in due course

1. Paymentmustbe in accordance withthe apparenttenor1. Paymentmustbe inaccordance withthe apparenttenorofthe instrument:payment indue course shouldbeofthe instrument:payment indue course shouldbe

made orafterthe maturity .made orafterthe maturity . eg:paymentofpostdatedcheque isnotapaymentindueeg:paymentofpostdatedcheque isnotapaymentindue

course.course.

2. Paymentmustbe made ingoodfaithandwithout2. Paymentmustbe made ingoodfaithandwithoutnegligencenegligence


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3. Paymentmustbe made tothe personinpossessionof3. Paymentmustbe made tothe personinpossessionofthe instrumentthe instrument

4. Paymentmustbe made inmoneyonlyunlessthe payee4. Paymentmustbe made inmoneyonlyunlessthe payeeagreestoacceptthe paymentinsome otherformagreestoacceptthe paymentinsome otherform

ie billsofexchange orpromissory noteie billsofexchange orpromissory note..


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Liability of banker:Liability of banker:

The paying banker is under the obligation to honour onlyThe paying banker is under the obligation to honour onlythose cheques which are drawn against the accountsthose cheques which are drawn against the accountsmaintained at the branch of the bank.maintained at the branch of the bank.

Bound to pay only such cheques presented to him forBound to pay only such cheques presented to him forpayment with reasonable time from the date of thepayment with reasonable time from the date of thecheque.cheque.

Cheques presented after banking hours have no legalCheques presented after banking hours have no legaleffect.effect.


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Funds to the credit of the customers account must beFunds to the credit of the customers account must besufficient and available.sufficient and available.

Cheques which are not drawn in the proper form areCheques which are not drawn in the proper form arerefused by the paying banker.refused by the paying banker.


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THANK YOUTHANK YOU

LAW OF NEGOTIABLE INSTRUMENT-part2

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