Page 173 - DMGT303_BANKING_AND_INSURANCE

Banking and Insurance

Notes 8.8 Keywords

Accommodation bills: Those bills, which are drawn without any actual consideration, merely,
to help out friends and relatives are known as accommodation bills.

Assignment: Assignment of any object means the transfer of its tile to another person through a
written and registered deed under the Transfer of Property Act.
Banker's draft: It is a bill of exchange in which a bank orders its branch or another bank, as the
case may be, to pay a specified amount to a specified person or to the order of the specified
person.
Bills of exchange: A bill of exchange is an instrument in writing containing an unconditional
order signed by the maker directing a certain person to pay a certain sum of money only to, or
to the order of, a certain person or to the bearer of the instrument.
Cheque: Cheque is a kind of bill of exchange, which is always drawn upon a specific bank and is
payable on demand.

Crossing of a cheque: When two angular parallel lines are drawn on the face of the cheque, then
the cheque said to be crossed.
Negotiable instrument: A negotiable instrument is one, the property and the title in which is
acquired by anyone who takes it as bonafide and for value notwithstanding any defect in the
title of the person from whom he/she took it.
Payment in due course: Payment in due course means payment of the instrument after the expiry
of the duration of the instrument, in good faith and without any negligence, to the possessor
thereof and without the existence of any circumstances that may lead one to believe that the
person receiving the payment is not entitled to it.
Promissory note: A promissory note is an instrument in writing (not being a bank note or
currency note) containing an unconditional undertaking, signed by the maker, to pay a certain
sum of money to, or to the order of a certain person.
Usances: The time fixed by the custom of countries for payment of bills drawn in one country but
are payable in another country is known as a usance.

8.9 Review Questions

1. Name any two types of commonly used negotiable instruments.
2. Write two points of distinction between a promissory note and a cheque.
3. "The drawer can only draw a Time Bill". Do you agree with this statement? Give reason.
4. "A cheque need not bear a date." Do you agree? Give reason.
5. Explain 'Darshani Hundi' in about 20 words.

6. State any four essential features of a bill of exchange.
7. Write any four points of distinction between a promissory note and a bill of exchange.
8. Explain briefly "certainty of person" and "time of payment" as features of negotiable
instruments.
9. "A bill of exchange must contain an unconditional promise to pay." Do you agree with this
statement? Justify your answer.

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