The disadvantage is if someone finds the promissory note and forges the signature of the lender, and present fraudulent identification papers, he can show himself as if he obtained the instrument properly and has the right to sell the instrument to another and in this regard defraud the true lender. Prompt Payment A negotiable instrument enables the holder to expect prompt payment because a dishonor means the ruin of the credit of all persons who are parties to the instrument. However, in some cases drawer and payee may be the same person. A negotiable instrument does not just give possession of the document but the right of property also. Even then, the absence of date does not invalidate the pro-note and the date of execution can be independently proved.
These are banking terms, generally. If such an instrument is lost or stolen, it may be deemed void. Section 124 - Cheque crossed specially Where a cheque bears across its face an addition of the name of a banker, either with or without the words not negotiable, that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that banker. This is the main distinction between a negotiable instrument and other subjects of ordinary transfer. This prevents another person from endorsing and further negotiating the check in the case of theft. When the instrument itself specifies the rate of interest payable on the amount mentioned it, interest must be paid at the rate from the date of the instrument.
A negotiable instrument can be transferred any number of times till it is at maturity. Payable On Demand :- The amount of the instrument is payable on demand or at any predetermination future time. The effect of a blank endorsement is to convert the order instrument into a bearer instrument which may be transferred merely by delivery. These documents provide no other promise on the part of the entity issuing the negotiation instrument. It is very simple and convenient method of payment. Types of negotiable instruments are 1.
Payable To The Bearer :- The amount written on it is payable to the bearer or to a specified person. Similarly, a provides the same function; however, it requires the funds to be allocated, or set aside, for the payee prior to the check being issued. Section 6 - Cheque A cheque is 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. It means that a person who receives a negotiable instrument has a clear and undisputable title to the instrument. Such a person is called the holder in due course and his interest in the instrument is well protected by the law.
Essential features of Negotiable Instruments There are many features of negotiable instruments. It helped me a lot. The Concept of the study Explains — Negotiable Instruments: , Definition of Negotiable Instruments, Characteristics of Negotiable Instruments, and Features of Negotiable Instruments. Definition of Bills 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. Consideration means in lieu of and in the context of bills of exchange, it means that the bill has been issued in exchange of some consideration i.
This is the written document which acts as the proof that the payer has to pay a specific amount of money to the payee within a certain time. A negotiable instrument contains no promise to perform any duties under a contract, and makes no consequence if the payer defaults, as would a contract. A negotiable instrument can be transferred many number of times till the date of maturity. If the promise to pay is coupled with a condition, it is not a promissory note. A certificate of deposit is a note of the bank Punishment Punishment for accused if proved guilty under section 138 N. The note may be made payable to the bearer, to a party named in the note, or to the order of the party named in the note.
All other higher denomination notes are bank promissory notes issued by the Reserve Bank of India. It can not be verbal. If the payer fails to give the money or dishonour the negotiable instrument, then legal action can be taken against that person and the negotiable instrument then will act as evidence in the eyes of law. This new lender assumes all the rights of a lender as described in the note. It can be drawn on anybody including a banker. .
Examples include checks, banknotes, and promissory notes. After the payment is made within due time as mentioned in the negotiable instrument, the document is null and void but if the payer fails to pay the money then the payee has the right to go to the authority and register a complaint against the payee for not fulfilling his end of the bargain as stated by him in the document. The holder of instrument need to give notice of transfer to the party legally responsible on the instrument to pay. The value of stamp depends upon the value of the pro-note or bill and the time of their payment. An everyday example of a negotiable instrument is a bank check, which is given to a payee person to be paid , who then takes it to his bank to be cashed or deposited into his account.
The receiver is authorized to the benefit of the instrument i. The time with in which the money is to be paid is decided by the payer the person who is paying and the payee the person who is receiving the money from the payer. Or, also common, an instrument may just have who it can be negotiated by restricted. The original holder the transferor must countersign the instrument as in the case of a cheque or merely deliver it as in the case of a bank note to the new holder; the new holder is then entitled to the benefit of the instrument in the case of a cheque, to the money from the bank; in the case of the bank note, to the sum promised on the note. This is amazing and informative for the students of Banking and Finance. In the case of order instruments, two things are required for a valid transfer: endorsement i:e. The property i … n a negotiable instrument can be transferred without any formality.