Page 122 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 6: Law of Negotiable Instruments

6.12 Keywords Notes

Bill of Exchange: A bill of exchange is an instrument in writing containing an unconditional to
the order of a certain person or to the bearer of the instrument.

Cheque: A cheque is a bill of exchange drawn on a specified banker and not expressed to be
payable.
Endorser: The person who endorses the note in favour of another person.
Endorsee: The person in whose favour the note is negotiated by endorsement
Holder: It is either the original payee or any other person in whose favour the note has been
endorsed.
Negotiable Instrument: Means a promissory note, bill of exchange or cheque payable either to
order or to bearer.

Payee: The person to whom the amount of the note is payable.
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.

Time bills: Also called as usance bills, are bills payable at a fixed period after date or sight of the
bills.
6.13 Self Assessment

State whether the following statements are true or false:
1. A negotiable instrument need not be in writing.
2. Signature of the maker is not required in the case of a promissory note.
3. Bills in set are used in foreign trade transactions.

4. It is not necessary to put any date in the case of promissory notes payable on demand.
5. A cheque must always be crossed to make it a valid instrument.
6. One can get a post-dated cheque encashed across the bank counter at any time.
7. The life of a cheque is three months from the date of issue.
8. All types of bills are entitled for three days of grace.

9. A post dated cheque is valid and negotiable
10. Maturity date is not required to be determined in the case of cheques.
Fill in the blanks:
11. …………… is one who receives the instrument for value and without any notice as to the
defect in the title of the transferor.
12. An …………… is one which may be construed either as a promissory note or as a bill of
exchange.

13. An inchoate instrument means an instrument that is …………… in certain respects.
14. A …………… is “a person who for consideration became the possessor of a promissory
note, bill of exchange or cheque.

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