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Negotiable Instruments

Negotiable Instruments

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Negotiable Instruments

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  1. Negotiable Instruments

  2. Definition of Negotiable Instrument • Means a promissory note, bill of exchange and cheque payable either to order or to the bearer

  3. Characteristics • Freely transferable • Title of the holder • Recovery • Presumptions • Consideration • Date • Time of acceptance • Time of transfer • Order of endorsements • Stamp • Holder presumed to be a holder in due course • Proof of protest

  4. Types of Instruments • Negotiable by Statute • Negotiable by Custom

  5. Classification of Negotiable Instruments • Bearer Instruments • Order • Inland & Foreign • On Demand • Time • Accommodation bill • Fictitious • Documentary bill

  6. Contd • Escrow • Ambiguous • Inchoate • Undated bills

  7. Payment in Due Course • Payment according to the apparent tenor • Payment on behalf of acceptor or drawee • The person must be in possession • Payment in good faith • No ground to believe that possessor is not entitled

  8. Parties to Negotiable Instrument • Parties to bill of exchange – Drawer, drawee, Acceptor, payee, holder, endorser, endorsee • Parties to promissory note – maker, payee, holder, endorser, endorsee • Parties to Cheque – maker, drawee, payee, holder, endorser, endorsee

  9. Holder & Holder in Due Course • Holder – possession, to recover or receive the amount • Holder in Due Course – consideration, holds instrument before maturity, good faith

  10. Privileges of a Holder in Due Course • Inchoate stamped instrument • Liability of prior parties • Fictitious payee • Without consideration • Conditional delivery • Cleansed of all defects • Unlawful means • Every holder is a holder due course

  11. Endorsement • Must be on the instrument • Signed by the endorser • Mere signature or signature & name of the party

  12. Kinds of Endorsement • Blank or general • Full or special • Restrictive endorsement • Partial endorsement • Conditional indorsement

  13. Discharge • By payment • Party primarily liable becoming holder • Express waiver • Cancellation • Contract

  14. Discharge of Parties • By payment • Party primarily liable becoming holder • Express waiver • Cancellation • Contract • More then forty-eight hours • Non-presentment of cheque • Material alteration • Operation of law

  15. Case Study • X Ltd a cotton textile company, enters into a contract with A Ltd, an adjacent cotton textile mill, to supply electricity from their power generation plant. After supplies have been made for 3 months it is discovered that this activity is beyond the scope of the objects clause of the memorandum of association of X Ltd. Share holders of X Ltd ratify the contract in their general body meeting. Can A Ltd which refuses to make payment on the ground that the contract is wholly null and void. Can A Ltd be compelled to make the payment?