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Unit 4: Law of Negotiable Instruments

4.10 International Law Concerning Negotiable Instruments Notes

There are four sections dealing with the international law concerning Negotiable Instruments.
These are explained below:

Liability on Foreign Instruments (S.134)

In the absence of a contract to the contrary, the liability of the maker or drawer of a foreign bill,
note or cheque is governed in all essential respects by the law of the place where he made the
instrument. The respective liability of the acceptor and endorser is governed by the law of the
place where the instrument is made payable.

Example: A bill is drawn by A in California, where the rate of interest is 25 per cent and
accepted by B, payable in Washington, where the rate of interest is 6 per cent. The bill is indorsed
in India and is dishonoured. An action on the bill is brought against B in India. He is liable to pay
interest at the rate of 6 per cent only; but if A is charged as drawer, he is liable to pay interest at
the rate of 25 per cent.

Law in Respect of Dishonour (S.135)

Where an instrument is made payable in a different country from that in which it is made or
endorsed, the law of the country where it is made payable determines what constitutes dishonour
and what notice of dishonour is sufficient.

Example: A bill drawn and endorsed in India, but accepted payable in France, is
dishonoured. The endorsee causes it to be protested for such dishonour and gives notice thereof
in accordance with the law of France, though not in accordance with the rules contained in
respect of bills which are not foreign. The notice is sufficient.

Foreign Instruments made in Accordance with Indian Law (S.136)

If a negotiable instrument is made, drawn, accepted or endorsed out of India, but in accordance
with the law of India, the circumstance that any agreement evidenced by such instrument is
invalid according to the law of the country wherein it was entered into does not invalidate any
subsequent acceptance or endorsement made thereon in India.

Presumption as to Foreign Law (S.137)
The law of any foreign country regarding negotiable instruments shall be presumed to be the
same as that of India unless and until the contrary is proved.

Self Assessment

Fill in the blanks:
19. There are ………………sections dealing with the international law concerning Negotiable
Instruments.
20. Where an instrument is made payable in a different country from that in which it is made
or endorsed, the law of the country where it is ……………………determines what
constitutes dishonour.

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