Page 170 - DCOM208_BANKING_THEORY_AND_PRACTICE

Unit 10: Negotiable Instruments

3. It must contain an Order: Though no particular form of words is necessary to form a valid Notes
bill, it is required that the words used must amount to an “order”. In other words, they
must not be precatory, i.e. amounting to as mere request.
4. Which must been Unconditional: It is of importance for a bill that the order directing
payment should be unconditional, i.e. the payment should not be dependent on the
happening as eventuality or the fulfilment of a condition.
5. It must direct a certain person: The drawee must be certain. There can be joint drawee of
bill but not alternate or successive drawee. Also, if the drawee’s name is wrongly mentioned,
evidence may lead to prove who was the person really intended.
6. To pay certain sum of Money Only: The amount to be paid must be expressed in terms of
money only.
7. To a Certain Person or his Order or to Bearer: The bill must be drawn and made payable
either to a certain person or his order to bearer. In this connection it has been recently held
in England that a document drawn payable to “cash or order” is not a bill of exchange as
it is not made payable “to or to the order of any specified persons or bearer”.
8. It must be properly stamped: Art. 13 of the Stamp Act lay down the proper stamp for bills
of exchange. Generally speaking, notice stamp is chargeable on a bill payable only demand.
A bill must be properly stamped when necessary. In absence of a proper stamp, the bill
may be in admissible in evidence (sec. 35, Stamp Act). Notice that under sec. 46, the
making (acceptance or endorsement) of a bill of exchange is not completed till delivery
thereof, either actual or constructive.

In short, before a document can be called a bill of exchange, the following things must be certain:
Drawer
Order

Drawee
Payee
Sum payable
These are popularly called the “five certainties” of a bill of exchange.
The following points regarding bills of exchange should also be kept in mind in case of a bill of
exchange.
Figures: the bill at the top or bottom corner mentions the amount in figures. The act
provides that where the sum payable is expressed in words is the amount payable (sec.18).
Date: the date is mentioned in order to compute maturity of bill. That date is by law
regarded as the date of the issue of the bill. A bill is not invalid because it is undated.
Evidence may be adduced to prove the date of its issue. As bill may been antedated or post
dated.

Place of issue is also mentioned: This is to determine whether it is an “inland “or a
“foreign” bill.
· “For vale received”: the words though typically found in bills of exchange are really
superfluous, consideration being always presumed in case of negotiable instrument
(sec.118) and also because consideration can always be proved by external evidence.

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