After reading the lesson, you should be able to know:
The Parties to a negotiable instrument
The liability of various parties to negotiable
The important parties to Negotiable Instruments can be listed as follows:
Parties to a promissory note: Maker, payee, indorser,
Parties to a bill of exchange: Drawer, Drawee or
Acceptor, drawee in case of need, acceptor for honour,
, indorser, indorsee.
Parties to a cheque: Drawer, drawee ( always a banker),
payee, indorser, indorsee
Let us learn about them
Drawer, Drawee, Acceptor, Maker, Payee, etc.,:
The party who draws a bill of exchange or a cheque or any other
instrument is called drawer.
The party on whom such bill of exchange of cheque is drawn is called
the drawee. In other words the person who is thereby directed to pay is
called the drawee.
(iii) The drawee of a bill of exchange who has signified his assent to the
order of the drawer is called the acceptor. The acceptor becomes liable
to the holder after he has signified his assent but not before.
Now a question would naturally arise as to who can be acceptors? Under
Section 33 of the Act, no person except the drawee of a bill of exchange, or
all or some of several drawees or a person named there in as drawee in case
of need, can bind himself by an acceptance. Under Section 34, where they are
several drawees of a bill of exchange who are not partners, each of them can
accept it for himself; but none of them can accept it for another without his
If follows from the aforesaid provisions that the following person can be
a)Drawee, i.e., the person directed to pay.
b)All or some of the several drawees when the bill is
addressed to more drawees than one.
c)A drawee in case of need.
d)An acceptor for honour.
e)Agent of any of the persons mentioned above.
f)When no drawee has been named in a bill but a person accepts it, then
he may be stopped from denying his liability as an acceptor.
Acceptance is ordinarily made by the drawee by the signing of his names
across the face of the bill and by delivery. Acceptance,
therefore, means the signification of assent to the order of the drawer by
delivery or notification thereof. Under Section 27 of the Act, every person
capable of legally entering into a contract, may make, draw, accept endorse,
deliver and negotiate a promissory note, bill of exchange or cheque, himself
or through a duly authorized agent. The agent may sign in two ways, viz., (a)
he may sign the principal’s name, for it is immaterial what hand actually
signs the name of the principal, when in fact there exists an authority for the
agent to put it these; (b) he may sign by procreation stating on the face of the
instrument that he signs as agent. It is thus essenial that the agent, while
putting his signature to the instrument, must have either express or implied
authority to enter, for his principal who must be sui juris, into the particular
contract. The authority of an agent to make, draw, accept or endorse notes