lecture-21 - MEANING AND TYPES OF NEGOTIABLE INTRUMENTS...

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Learning Outcomes After reading the lesson, you should be able to know: · The meaning of Negotiable Instruments · The important types of Negotiable Instruments Introduction We are aware that money is most common medium of exchange itself has the exchange value and is freely transferable. It was felt although the use of ready cash is desirable due to acceptability but may cause risk and inconvenience in dealing. Its substitute leads to development of Negotiable Instruments. The Negotiable Instrument Act 1881 came into force on 1 st March 1881. It extends to the whole of India except the State of Jammu & Kashmir. The term Negotiable Instrument consists of two parts viz; Negotiable and Instrument. The word ‘negotiable’ means transferable by delivery and the word ‘ instrument ‘ mean written documents by which a right is created in favour of some person. It means an instrument possessing the quality of Negotiability is entitled to be called negotiable instrument According to Will “A negotiable instrument is one the property in which is acquired by anyone who takes it bonafide and for value not withstanding any defect of title in the person from whom he took it” Thus a negotiable instrument must possess two features. 1.The right of ownership contained in the instrument can be transferred from one person to another by mere delivery, if it is payable to bearer or by endorsement and delivery if payable to order and 2.The transferee taking the instrument in good faith and for consideration gets a good title to the same even though the title of the transfer is defective. (a) Meaning of Negotiable Instrument Payable to order. A promissory note, bill of exchange or cheque is payable to order if, either of the following two conditions is fulfilled: a)It must be expressed to be so payable b)It must be expressed to be payable to a particular person and it must not contains words which prohibit transfer or indicate and intention that it shall not be transferable. (b) Meaning of Negotiable instrument Payable to Bearer. A Promissory note, bill of exchange or cheque is payable to bearer if either of the following condition is fulfilled a)It must be expressed to be so payable b)The only and last endorsement must be endorsement in blank Essential Characteristics Feature of a Negotiable Instrument The essential characteristics of a negotiable instrument have been shown as under: 1.Payable to order or bearer 2.Freely transferable 3.Presumption as to holder 4.Title of holder in due course 5.Presumption as to consideration Let us discuss these one by one 1.Payable to order or bearer: - It must be payable either to order or bearer 2.Freely Transferable:- A instrument payable to order is negotiable by endorsement and delivery and an instrument payable to bearer is negotiable by mere delivery 3.Presumption as to Holder:- Every holder of negotiable instrument is presumed to be holder in due course (Section 118) 4.Title of holder in due course:- A holder in due course ( i.e.
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lecture-21 - MEANING AND TYPES OF NEGOTIABLE INTRUMENTS...

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