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Instruments
Act 1881
What is Negotiable
Instruments?
The term negotiable instruments means a written document
which entitles a person to a sum of money.
A negotiable instruments is transferable by delivery or by
endorsement and delivery.
The transfer entitles a person to the sum of money mentioned
therein.
Thus the negotiable instrument is a document which is
legally recognized by custom of trade or law, transferable by
delivery or by endorsement and delivery.
Characteristics Of a Negotiable
Instrument
Bills Of
Exchange
Cheque
Promissory Note
BILL OF
EXCHANGE
MEANING
According to the Negotiable Instruments Act 1881, a bill of exchange is
defined as 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 to the bearer of the
instrument.
It means that the Bill of Exchange is drawn by a person directing
another person to pay the specified sum of money to the bearer of the
instrument or to a specified person on his/her order.
FEATURES
A Bill of Exchange is a written
order.
It is drawn and signed by the
maker, i.e., drawer of the bill.
It is an unconditional order to a
person, i.e., drawee to pay the
specified amount.
The specified amount is payable
to the person named in the bill or to
his order or to the bearer.
IMPORTANT
TERMS
Parties
DRAWER: The person who makes the bill of exchange is called
drawer.
DRAWEE: The person who is directed to pay is called drawee.
PAYEE: The person to whom the payment is to be made is called
payee.
ACCEPTOR: When the drawee accepts the bill is called acceptor.
Promissory note
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.
Che
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Case Study
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