4) The Negotiable Instrument Act

NEGOTIABLE INSTRUMENTS ACT, 1881
Area: INTEGRATIVE MGMT
Course Category: Global Leadership
Course Title : Business Law

 The Negotiable Instruments Act was enacted, in India, in 1881.
 Prior, the provision of the English Negotiable Instrument Act were applicable.
 Present Act is based on the English Act with modifications.
 The Act operates subject to the provisions of Sections 31 and 32 of the Reserve
Bank of India Act, 1934.
 Section 31 of the RBI Act: No person in India other than the Bank or as
expressly authorized by this Act, the Central Government shall draw, accept,
make or issue any bill of exchange, hundi, promissory note or engagement for
the payment of money payable to bearer on demand.
 Section 32 of the RBI Act makes issue of such bills or notes punishable with fine
which may extend to the amount of the instrument.
August 6, 2021 Legal Aspects of Business Class 4 2

The effect or the consequences of these provisions are:
1. A promissory note cannot be made payable to the bearer, no matter whether it

is payable on demand or after a certain time.
2. A bill of exchange cannot be made payable to the bearer on demand though it

can be made payable to the bearer after a certain time.
3. But a cheque payable to bearer or demand can be drawn on a person’s account

with a banker.

 Section 13 (a) of the Act, “Negotiable instrument means a promissory note, bill
of exchange or cheque payable either to order or to bearer, whether the word
“order” or “ bearer” appear on the instrument or not.”
 Negotiable Instrument means
1. a written document which creates a right in favour of some person.
2. which is freely transferable.

 Does not exclude the possibility of adding any other instrument which satisfies
the following two conditions of negotiability:
1. The instrument should be freely transferable (delivery/endorsement) by the

custom of the trade;
2. The person who obtains it in good faith and for value should get it free from all
defects and be entitled to recover the money of the instrument in his own
name.

CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT
Property:
 The possessor is presumed to be the owner of the property mentioned.
 A negotiable instrument transfers possession and right to property also.
 The property can be transferred without any formality.
 In the case of bearer instrument, the property passes by mere delivery to the
transferee.
 In the case of an order instrument, endorsement and delivery are required for
the transfer of property.

CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT
Title:
 The transferee of a negotiable instrument is known as ‘holder in due course.’
 A bona fide transferee for value is not affected by any defect of title on the part
of the transferor or of any of the previous holders of the instrument.
Rights:
 The transferee of the negotiable instrument can sue in their own name.
 A negotiable instrument can be transferred any number of times till it is at

maturity.
 The holder of the instrument need not give notice of transfer to the party liable
to pay.
PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENT
Presumptions:
 Certain presumptions apply to all negotiable instruments i.e Consideration.
 It is not necessary to write in a promissory note the words ‘for value received’
or similar expressions.
 Usually included to create additional evidence of consideration.
Prompt payment:
 A negotiable instrument enables the holder to expect prompt payment because

a dishonour means the ruin of the credit of all persons who are parties to the
instrument.

Section 118. Presumptions as to negotiable instruments.—
 Until the contrary is proved, the following presumptions shall be made:—
(a) of consideration:—that every negotiable instrument was made or drawn for

consideration, and that every such instrument, when it has been accepted,
indorsed, negotiated or transferred, was accepted, indorsed, negotiated or
transferred for consideration;
(b) as to date:—that every negotiable instrument bearing a date was made or

drawn on such date;
(c) as to time of acceptance:—that every accepted bill of exchange was accepted

within a reasonable time after its date and before its maturity;
(d) as to time of transfer:—that every transfer of a negotiable instrument was

made before its naturity;

Section 118. Presumptions as to negotiable instruments.—
 Until the contrary is proved, the following presumptions shall be made:—
 (e) as to order of endorsements:—that the endorsements appearing upon a

negotiable instrument were made in the order in which they appear then on;
 (f) as to stamp:— that a lost promissory note, bill of exchange or cheque was
duly stamped;
 (g) that holder is a holder in due course:— that the holder of a negotiable
instrument is a holder in due course : provided that, where the instrutment has
been obtained from its lawful owner, or from any person in lawful custody
thereof, by means of an offence or fraud, or has been obtained from the maker
or acceptor thereof by means of an offence or fraud, or for unlawful
consideration, the burden of proving that the holder is a holder in due course
lies upon him.

Section 119. Presumption on proof of protest.—
 In a suit upon an instrument which has been dishonoured, the Court shall, on
proof of the protest, presume the fact of dishonour, unless and until such fact is
disproved.
 Sections 118 and 119 of the Negotiable Instrument Act lay down certain
presumptions which the court presumes in regard to negotiable instruments.
 Presumptions need not be proved as they are presumed to exist in every

negotiable instrument

Following presumptions shall be made in case of all negotiable instruments:
Consideration:
 Made drawn, accepted or endorsed for consideration.
 Consideration is present in every negotiable instrument until the contrary is

presumed.
 Rebutted by proof that the instrument had been obtained from its lawful owner
by means of fraud or undue influence.
Date:
If dated than presumed that it has been made or drawn on such date, unless the
contrary is proved.
Time of acceptance:
 Accepted bill of exchange is assumed to have been accepted within a reasonable

time after its issue and before its maturity.
 This assumption only applies when the acceptance is not dated;
 If the acceptance is date, it will prima facie be taken as evidence of the date on
which it was made.
Time of transfer:
 Assumed that every transfer of a negotiable instrument was made before its
maturity.

Order of endorsement:
 Assumed that the endorsements appearing upon a negotiable instrument were
made in the order in which they appear thereon.
Stamp:
 Assumed that a lost promissory note, bill of exchange or cheque was duly
stamped.
Holder in due course:

 Assumed that the holder of a negotiable instrument is the holder in due course.
 If obtained by means of an offence or fraud, the holder has to prove that he is a

holder in due course.
 Holder of a negotiable instrument is assumed to have paid consideration for it

and to have taken it in good faith.

Proof of protest:
 As per Section 119, in a suit upon an instrument which has been dishonoured,
the court shall on proof of the protest, assume the fact of dishonour.

TYPES OF NEGOTIABLE INSTRUMENT
Section 13 states that a negotiable instrument is:
(i) Promissory notes
(ii) Bills of exchange
(iii) Cheques.
Negotiable instruments recognized by usage or custom are:
(i) Hundis
(ii) share warrants
(iii) Dividend warrants
(iv) Bankers draft

TYPES OF NEGOTIABLE INSTRUMENT
Negotiable instruments recognized by usage or custom are:
 (V) Circular notes
 (VI) Bearer debentures
 (VII) Debentures of Bombay Port Trust
 (VIII) Railway receipts
 (IX) Delivery orders.
This list not Closed. New kinds of securities may be recognition.
The courts usually follow the practice of English courts with regards to the
character of negotiability to other instruments.

PROMISSORY NOTES
Section 4: “Promissory note.”—
 A “Promissory note” is an instrument in writing (not being a bank-note or 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 instrument.
ESSENTIALS:
 It must be in writing.
 It must have certainly in an express promise or clear understanding to pay
 Promise to pay must be unconditional

PROMISSORY NOTES
ESSENTIALS:
 It should be signed by the maker
 The maker must be certain
 The payee must be certain
 The promise should be to pay money and money only
 The amount should be certain
 Other formalities

BILL OF EXCHANGE
Section 5: “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, a certain person or to the bearer of the
instrument.
 A promise or order to pay is not “conditional”, within the meaning of this

section and section 4, by reason of the time for payment of the amount or any
instalment thereof being expressed to be on the lapse of a certain period after
the occurrence of a specified even which, according to the ordinary expectation
of mankind, is certain to happen, although the time of its happening may be
uncertain.

BILL OF EXCHANGE
Section 5: “Bill of exchange”.—
 The sum payble may be “certain”, within the meaning of this section and section
4, although it includes future interest or is payable at an indicated rate of
exchange, or is according to the course of exchange, and although the
instrument provides that, on default of payment of an instalment, the balance
unpaid shall become due.
 The person to whom it is clear that the direction is given or that payment is to
be made may be a “certain person”, within the meaning of this section and
section 4, although he is mis-named or designated by description only.

BILL OF EXCHANGE
ESSENTIALS:
 It must be in writing.
 It must be signed by the drawer.
 The drawer, drawee and payee must be certain.
 The sum payable must also be certain.
 It should be properly stamped.
 It must contain an express order to pay money and money alone.

BILL OF EXCHANGE AND PROMISSORY NOTE
DISTINCTION:
 Number of parties
 Payment to the maker
 Unconditional promise
 Prior acceptance
 Primary or absolute liability
 Relation
 Protest for dishonour
 Notice of dishonour

INLAND INSTRUMENT & FOREIGN INSTRUMENT
Section 11: Inland instrument.—
 A promissory note, bill of exchange or cheque drawn or made in [India], and

made payable in, or drawn upon any person resident, in [India] shall be deemed
to be an inland instrument.
Section 12: Foreign instrument. —
 Any such instrument not so drawn, made or made payable shall be deemed to
be a foreign instrument.

OF BILLS IN SETS
Section 132: Set of bills.—
 Bills of exchange may be drawn in parts, each part being numbered and
containing a provision that it shall continue payable only so long as the others
remain unpaid. All the parts together make a set; but the whole set constitutes
only one bill, and is extinguished when one of the parts, if a separate bill, would
be extinguished.
 Exception.—When a person accepts or indorses different parts of the bill in

favour of different persons, he and the subsequent endorsers of each part are
liable on such part as if it were a separate bill.
Section 133: Holder of first acquired part entitled to all—
 As between holders in due course of different parts of the same set, he who first
acquired title to his part is entitled to the other parts and the money
represented by the bill.

OF TIME OF PAYMENT
Section 19: Instruments payable on demand —
 A promissory note or bill of exchange, in which no time for payment is specified,

and a cheque, are payable on demand.
 Section 22:. “Maturity”.—
 The maturity of a promissory note or bill of exchange is the date at which it falls
due.
Days of grace.—
 Every promissory note or bill of exchange which is not expressed to be payable

on demand, at sight or on presentment is at maturity on the third day after the
day on which it is expressed to be payable.

OF TIME OF PAYMENT
Section 23. Calculating maturity of bill or note payable so many months after date
or sight.—
 In calculating the date at which a promissary note or bill of exchange, made

payable a stated number of months after date or after sight, or after a certain
event, is at maturity, the period stated shall be held to terminate on the day of
the month which corresponds with the day on which the instrument is dated, or
presented for acceptance or sight, or noted for non-acceptance, or protested for
non-acceptance, or the event happens, or, where the instrument is a bill of
exchange made payable a stated number of months after sight and has been
accepted for honour, with the day on which it was so accepted.
 If the month in which the period would terminate has no corresponding day, the
period shall be held to terminate on the last day of such month.

CHEQUES
Section 6: “Cheque”.—
 A “cheque” is a bill of exchange drawn on a specified banker and not expressed

to be payable otherwise than on demand and it includes the electronic image of
a truncated cheque and a cheque in the electronic form.
 Takeaway:
(i) it is always drawn on a specified banker,
(ii) it is always payable on demand.

BILLS OF EXCHANGE AND CHEQUE
BILLS OF EXCHANGE CHEQUE
 Drawn on some person or firm.  Always drawn on a bank.
 Accepted before payment can be claimed.  Does not require any such acceptance.
 Drawn Payable or on expiry of time.  Can only be drawn payable on demand.
 Three days Grace Period.  No grace Period is given.
 The drawer of the bill is discharged from  the drawer of a cheque is discharged only
his liability, if it is not presented for if he suffers any damage by delay in
payment. presenting the cheque for payment.
 Notice of dishonour of a bill is necessary.  No notice is necessary.
 Need not be crossed.  A cheque may be crossed.
 Must be properly stamped.  Need not be Stamped.
 Bill payable on demand can never be  Drawn to bearer payable on demand
drawn to bearer. shall be valid.
 Payment of a bill cannot be  Payment can be countermanded by the
countermanded by the drawer. drawer

PARTIES TO NEGOTIABLE INSTRUMENTS
Section 6: “Cheque”.—
 A “cheque” is a bill of exchange drawn on a specified banker and not expressed

to be payable otherwise than on demand and it includes the electronic image of
a truncated cheque and a cheque in the electronic form.
Section 7: “Drawer.” “Drawee”.—
 The maker of a bill of exchange or cheque is called the “drawer”; the person
thereby directed to pay is called the “drawee”.
 “Drawee in case of need”.— When in the Bill or in any indorsement thereon the
name of any person is given in addition to the drawee to be resorted to in case
of need, such person is called a “drawee in case of need.”

OF NOTES, BILLS AND CHEQUES
Section 7: “Drawer.” “Drawee”.—
 “Acceptor”.—After the drawee of a bill has signed his assent upon the bill, or, if
there are more parts thereof than one, upon one of such parts, and delivered
the same, or given notice of such signing to the holder or to some person on his
behalf, he is called the “acceptor”.
 “Acceptor for honour”.— [When a bill of exchange has been noted or protested
for non-acceptance acceptance or for better security,] and any person accepts it
supra protest for honour of the drawer or of any one of the endorsers, such
person is called an “acceptor for honour”.
 “Payee”.—The person named in the instrument, to whom or to whose order the

money is by the instrument directed to be paid, is called the “Payee”.

Section 8: . “Holder”.—
 The “holder” of a promissory note, bill of exchange or cheque means any person
entitled in his own name to the possession thereof and to receive or recover the
amount due thereon from the parties thereto.
 Where the note, bill or cheque is lost or destroyed, its holder is the person so
entitled at the time of such loss or destruction.
Section 9: “Holder in due course”.—
 “Holder in due course” means any person who for consideration became the
possessor of a promissory note, bill of exchange or cheque if payable to bearer,
 or the payee or indorsee thereof, if [payable to order,]
 before the amount mentioned in it became payable, and without having sufficient
cause to believe that any defect existed in the title of the person from whom he
derived his title.
Privileges of a holder in due course
 Instrument purged of all defects
 Rights not affected in case of an inchoate instrument
 All prior parties liable
 Can enforce payment of a fictitious bill
 No effect of conditional delivery
 No effect of absence of consideration or presence of an unlawful consideration
 Estoppel against denying original validity of instrument
 Estoppel against denying capacity of the payee to indorsee
 Estoppel against indorser to deny capacity of parties

Section 15. endorsement.—
 When the maker or holder of a negotiable instrument signs the same, otherwise
than as such maker, for the purpose of negotiation, on the back or face thereof
or on a slip of paper annexed thereto, or so signs for the same purpose a
stamped paper intended to be completed as a negotiable instrument, he is said
to indorse the same, and is called the “endorser”.
Section 16: endorsement “in blank” and “in full”.—
1. If the endorser signs his name only, the indorsement is said to be “in blank,”
and if he adds a direction to pay the amount mentioned in the instrument to, or
to the order of, a specified person, the indorsement is said to be “in full”; and
the person so specified “endorsee”.—is called the “endorsee” of the instrument.
2. The provisions of this Act relating to a payee shall apply with the necessary
modifications to an indorsee.

NEGOTIATION
Section 14: Negotiation.—
 When a promissory note, bill of exchange or cheque is transferred to any

person, so as to constitute that person the holder thereof, the instrument is said
to be negotiated.
Conditions:
 Transfer of the instrument to another person; and
 The transfer must be made in such a manner as to constitute the transferee the
holder of the instrument.

MODES OF NEGOTIATION
Section 47. Negotiation by delivery.—
 Subject to the provisions of section 58, a promissory note, bill of exchange or

cheque payable to bearer is negotiable by delivery thereof.
Section 48: Negotiation by indorsement.—

cheque [payable to order], is negotiable by the holder by indorsement and
delivery thereof.

ASSIGNMENT & DELIVERY
 Transfer by assignment takes place when sale of right occurs without

endorsement.
 The assignee entitled to possession and can recover the amount due on the
instrument from the parties.
Section 46: Delivery.—
 The making, acceptance or indorsement of a promissory note, bill of exchange

or cheque is completed by delivery, actual or constructive.
 As between parties standing in immediate relation, delivery to be effectual must

be made by the party making, accepting or indorsing the instrument, or by a
person authorized by him in that behalf.

ASSIGNMENT & DELIVERY
Section 46: Delivery.—
 As between such parties and any holder of the instrument other than a holder
in due course, it may be shown that the instrument was delivered conditionally
or for a special purpose only, and not for the purpose of transferring absolutely
the property therein.
 A promissory note, bill of exchange or cheque payable to bearer is negotiable by

the delivery thereof.
 A promissory note, bill of exchange or cheque payable to order is negotiable by

the holder by indorsement and delivery thereof.

INDORSEMENT
Section 48: Negotiation by indorsement.—

cheque [payable to order], is negotiable by the holder by indorsement and
delivery thereof.
Section 49: Conversion of indorsement in blank into indorsement in full.—
 The holder of a negotiable instrument indorsed in blank may, without signing

his own name, by writing above the indorser's signature a direction to pay to
any other person as indorsee, convert the indorsement in blank into an
indorsement in full; and the holder does not thereby incur the responsibility of
an indorser.

INDORSEMENT
Section 50. Effect of indorsement.—
 The indorsement of a negotiable instrument followed by delivery transfers to

the indorsee the property therein with the right of further negotiation; but the
indorsement may, by express words, restrict or exclude such right, or may
merely constitute the indorsee an agent to indorse the instrument, or to receive
its contents for the indorser, or for some other specified person.
Section 51: Who may negotiate.—
 Every sole maker, drawer, payee or indorsee, or all of several joint makers,
drawers, payees or indorsees, of a negotiable instrument may, if the
negotiability of such instrument has not been restricted or excluded as
mentioned in section 50, indorse and negotiate the same.

INDORSEMENT
Section 52: Indorser who excludes his own liability or makes it conditional.—
 The indorser of a negotiable instrument may, by express words in the

indorsement, exclude his own liability thereon, or make such liability or the
right of the indorsee to receive the amount due thereon depend upon the
happening of a specified event, although such event may never happen.
 Where an indorser so excludes his liability and afterwards becomes the holder
of the instrument, all intermediate indorsers are liable to him.
Section 54. Instrument indorsed in blank.—
 Subject to the provisions hereinafter contained as to crossed cheques, a

negotiable instrument indorsed in blank is payable to the bearer thereof even
although originally payable to order.

INDORSEMENT
Classes of endorsement: An endorsement may be
 Blank or general (Sections 16 and 54).
 Special or full (Sections 16).
 Partial (Sections 56).
 Restrictive (Section 50).
 Conditional.

UNLAWFUL INSTRUMENTS
Section 58: Instrument obtained by unlawful means or for unlawful
consideration.—
 When a negotiable instrument has been lost, or has been obtained from any
maker, acceptor or holder thereof by means of an offence or fraud, or for an
unlawful consideration, no possessor or indorsee who claims through the
person who found or so obtained the instrument is entitled to receive the
amount due thereon from such maker, acceptor or holder, or from any party
prior to such holder, unless such possessor or indorsee is, or some person
through whom he claims was, a holder thereof in due course.

INSTRUMENTS WITHOUT CONSIDERATION
Instruments that are not Valid:
 Instruments obtained by fraud
 Instrument obtained for an unlawful consideration
 Forged instrument
 Forged endorsement

DISHONOUR
Section 91. Dishonour by non-acceptance.—
 A bill of exchange is said to be dishonoured by non-acceptance when the

drawee, or one of several drawees not being partners, makes default in
acceptance upon being duly required to accept the bill, or where presentment is
excused and the bill is not accepted.
 Where the drawee is incompetent to contract, or the acceptance is qualified, the

bill may be treated as dishonoured.
Section 92. Dishonour by non-payment.—
 A promissory note, bill of exchange or cheque is said to be dishonoured by non-

payment when the maker of the note, acceptor of the bill or drawee of the
cheque makes default in payment upon being duly required to pay the same.

OF NOTICE OF DISHONOUR
Section 93. By and to whom notice should be given.—
 When a promissory note, bill of exchange or cheque is dishonoured by non-

acceptance or non-payment, the holder thereof, or some party thereto, who
remains liable thereon, must give notice that the instrument has been so
dishonoured to all other parties whom the holder seeks to make severally liable
thereon, and to some one of several parties whom he seeks to make jointly
liable thereon.
 Nothing in this section renders it necessary to give notice to the maker of the
dishonoured promissory note or the drawee or acceptor of the dishonoured bill
of exchange or cheque.

Section 95. Party receiving must transmit notice of dishonour.—
 Any party receiving notice of dishonour must, in order to render any prior
party liable to himself, give notice of dishonour to such party within a
reasonable time, unless such party otherwise receives due notice as provided
by section 93.
Section 96. Agent for presentment.—
 When the instrument is deposited with an agent for presentment, the agent is
entitled to the same time to give notice to his principal as if he were the holder
giving notice of dishonour, and the principal is entitled to a further like period
to give notice of dishonour.

Section 97. When party to whom notice given is dead.—
 when the party to whom notice of dishonour is dispatched is dead, but the
party dispatching the notice is ignorant of his death, the notice is sufficient.
Section 98. When notice of dishonour is unnecessary.—

 No notice of dishonour is necessary—
a) when it is dispensed with by the party entitled thereto;
b) in order to charge the drawer when he has countermanded payment;
c) when the party charged could not suffer damage for want of notice;
d) when the party entitled to notice cannot after due search be found; or the party
bound to give notice is, for any other reason, unable without any fault of his
own to give it;
e) to charge the drawers, when the acceptor is also a drawer;
f) in the case of a promissory note which is not negotiable;
g) when the party entitled to notice, knowing the facts, promises unconditionally
to pay the amount due on the instrument.

Section 105: Reasonable time.—
 In determining what is a reasonable time for presentment for acceptance or

payment, for giving notice of dishonour and for noting, regard shall be had to
the nature of the instrument and the usual course of dealing with respect to
similar instruments; and, in calculating such time, public holidays shall be
excluded.
Section 106. Reasonable time of giving notice of dishonour.—
 If the holder and the party to whom notice of dishonour is given carry on
business or live (as the case may be) in different places, such notice is given
within a reasonable time if it is dispatched by the next post or on the day next
after the day of dishonour.
 If the said parties carry on business or live in the same place, such notice is
given within a reasonable time if it is dispatched in time to reach its destination
on the day next after the day of dishonour.

138. Dishonour of cheque for insufficiency, etc., of funds in the account
is returned by the bank unpaid, either because of the amount of money standing
to the credit of that account is insufficient to honour the cheque or that it exceeds
the amount arranged to be paid from that account by an agreement made with
that bank
Shall be punished with imprisonment for a term which may be extended to two
years or with fine which may extend to twice the amount of the cheque, or with
both:

Provided that nothing contained in this section shall apply unless—
(a) the cheque has been presented to the bank within a period of six months from
the date on which it is drawn or within the period of its validity, whichever is
earlier;
(b) the payee or the holder in due course of the cheque, as the case may be, makes
a demand for the payment of the said amount of money by giving a notice; in
writing, to the drawer of the cheque, within thirty days of the receipt of
information by him from the bank regarding the return of the cheque as
unpaid; and
(c) the drawer of such cheque fails to make the payment of the said amount of
money to the payee or, as the case may be, to the holder in due course of the
cheque, within fifteen days of the receipt of the said notice.


4) The Negotiable Instrument Act

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4) The Negotiable Instrument Act

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NEGOTIABLE INSTRUMENTS ACT, 1881

Area: INTEGRATIVE MGMT

Course Category: Global Leadership

Course Title : Business Law

 Present Act is based on the English Act with modifications.

August 6, 2021 Legal Aspects of Business Class 4 2

The effect or the consequences of these provisions are:

1. A promissory note cannot be made payable to the bearer, no matter whether it

2. A bill of exchange cannot be made payable to the bearer on demand though it

3. But a cheque payable to bearer or demand can be drawn on a person’s account

August 6, 2021 Legal Aspects of Business Class 4 3

 Negotiable Instrument means

1. a written document which creates a right in favour of some person.

2. which is freely transferable.

August 6, 2021 Legal Aspects of Business Class 4 4

1. The instrument should be freely transferable (delivery/endorsement) by the

August 6, 2021 Legal Aspects of Business Class 4 5

 The possessor is presumed to be the owner of the property mentioned.

 A negotiable instrument transfers possession and right to property also.

 The property can be transferred without any formality.

August 6, 2021 Legal Aspects of Business Class 4 7

 The transferee of a negotiable instrument is known as ‘holder in due course.’

 A negotiable instrument can be transferred any number of times till it is at

 Certain presumptions apply to all negotiable instruments i.e Consideration.

 Usually included to create additional evidence of consideration.

 A negotiable instrument enables the holder to expect prompt payment because

August 6, 2021 Legal Aspects of Business Class 4 9

 Until the contrary is proved, the following presumptions shall be made:—

(a) of consideration:—that every negotiable instrument was made or drawn for

(b) as to date:—that every negotiable instrument bearing a date was made or

(c) as to time of acceptance:—that every accepted bill of exchange was accepted

(d) as to time of transfer:—that every transfer of a negotiable instrument was

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 Until the contrary is proved, the following presumptions shall be made:—

 (e) as to order of endorsements:—that the endorsements appearing upon a

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 Presumptions need not be proved as they are presumed to exist in every

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 Made drawn, accepted or endorsed for consideration.

 Consideration is present in every negotiable instrument until the contrary is

 Accepted bill of exchange is assumed to have been accepted within a reasonable

 This assumption only applies when the acceptance is not dated;

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Holder in due course:

 If obtained by means of an offence or fraud, the holder has to prove that he is a

 Holder of a negotiable instrument is assumed to have paid consideration for it

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(i) Promissory notes

(ii) Bills of exchange

Negotiable instruments recognized by usage or custom are:

(ii) share warrants

(iii) Dividend warrants

(iv) Bankers draft

 (VI) Bearer debentures

 (VII) Debentures of Bombay Port Trust

 (VIII) Railway receipts

 (IX) Delivery orders.

This list not Closed. New kinds of securities may be recognition.

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 A “Promissory note” is an instrument in writing (not being a bank-note or a

 It must have certainly in an express promise or clear understanding to pay

 Promise to pay must be unconditional