Page 185 - DMGT102_MERCANTILE_LAWS_I

Unit 14: Law of Negotiable Instruments

14.7.1 Maturity (Secs.21-25) Notes

Cheques are always payable on demand but other instruments like bills, notes, etc., may be made

payable on a specified date or after the specified period of time. The date on which payment of
an instrument falls due is called maturity (Sec.22). Therefore most of the provisions relating to
presentment for payment are linked with the maturity of the instrument. Sec.21 provides that a
note or bill ‘at sight’ or ‘on presentment’ is payable on demand. It is due for payment as soon
as it is issued. Therefore the question of maturity arises only in the case of a note or bill payable
‘After sight’ or ‘After date’ or at a certain period after the happening of an event which is certain
to happen.

14.7.2 Presentment for Payment

A negotiable instrument must be presented for payment to the maker, acceptor or drawee thereof,
as the case may be, by the holder or his agent. In case of default, the parties to the instrument
other than the maker, acceptor or drawee are not liable to such holder (Sec.64). The presentment
for payment must be made during the usual hours of business, and at a banker’s premises, during
banking hours (Sec.65).

Task Discuss the various effects of endorsement.

14.8 Dishonour

14.8.1 Dishonour of a Bill

A bill of exchange may be dishonoured either by non-acceptance or by non-payment. A negotiable
instrument is said be dishonoured by non-payment when the maker, acceptor or drawee, as the
case may be, makes default in payment upon being duly required to pay the same (Sec.92). The
effect of dishonour of a negotiable instrument whether by non-acceptance or non-payment is
to render the drawer and all the endorsers liable to the holder. However, their liability can be
invoked only if the holder gives them notice of such dishonour. The drawer is liable only if the
instrument is dishonoured by non-payment.
When a negotiable instrument is dishonoured by non-acceptance or non-payment, the holder
must give notice of dishonour to the drawer and all other parties whom he seeks to make liable.

14.8.2 Noting

Noting is a convenient method of authenticating the fact of dishonour. Where an instrument is
dishonoured, the holder, besides giving the notice as referred to above, should get the bill or
promissory note ‘noted’ by the notary public. The notary public presents the instrument, notes
down in his register the date of its dishonour and the reason, if any, given by the acceptor. If the
instrument has been expressly dishonoured, the reason why the holder treats it as dishonoured,
and the notary’s charges should be mentioned. ‘Noting’ must be made within a reasonable time
after dishonour. The holder may cause such dishonour to be noted by the notary public upon
the instrument or upon a paper attached thereto or partly upon each (Sec.99). Every notary is
required to have and use a seal, and an act can only be deemed a notarial act if it is done by a
notary under his signature and offi cial seal.

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