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Types of the negotiable instruments
1. Types Of The Negotiable Instruments
Created By: Piyush Dobariya (16)
2. Negotiable Instruments
• What is negotiable?
• Negotiable means transferable.
• The negotiation that goes on refers to the transfer of the
instrument between two people, or from one bank to
another, or even from one country to another.
• What is an instrument?
• In the broadest sense, almost any agreed-upon medium
of exchange could be considered a negotiable
instrument.
• In day-to-day banking, a negotiable instrument usually
refers to checks, drafts, bills of exchange, and some
types of promissory notes.
3. Forms of Negotiable Instruments
• A negotiable instrument is a written order
promising to pay a sum of money.
• A document becomes negotiable when it
contains an unconditional promise to pay
money and is payable to a bearer or
payable on demand.
4. Nature of the negotiable instrument are:
Be in writing
Be signed by the maker or drawer
Be an unconditional promise or order to pay
State a fixed amount of money
Be freely transferable from one to another person
Be payable on demand or at a definite time
Be payable to order or to bearer
6. Checks
Legal definition:(S 6)
“A" cheque" is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand”.
NATURE
1. Always drawn on specified bank,
2. Always payable on demand.
3. Unconditional order
4. Certain sum of money
5. Sing
6. Banker name
7. Codes
8. Writing etc.
7. Parties of Check
Drawer : who makes cheque.
Drawee : Always banker.
Payee : whom the amount payable
9. Promissory Note
Legal definition:(S 6)
"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.
Illustrations :
• A signs instruments in the following terms
• (a) " I promise to pay B or order Rs. 500."
• (b) I promise to pay B Rs. 500 which shall be due to him.“
• (c) " I promise to pay B Rs. 500 seven days after my marriage with C."
10. Parties Of Promissory Note
Maker : who makes PN.
Payee : whom the amount payable
11. Essentials Of Valid Promissory Note
Must be in writing
Must be unconditional
Must express promise to pay
Must in term of money only
Must pay in certain amount of money
Must contain certain parties
Must be signed by maker
Other formalities like date, consideration
etc.
13. Bill of exchange
Legal definition:(S 5)
“ 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.”
Parties Of Promissory Note:-
Drawer : who makes BE
Drawee : Always ACCEPTOR.
Payee : whom the amount payable
14. Essentials Of Valid Bill Of Exchange
Must be in writing
Must be unconditional
Must express order to pay
Must in term of money only
Must pay in certain amount of money
Must contain certain parties
Must be signed by drawer
Other formalities like date, consideration,
attestation etc.