Page 92 - DMGT407Corporate and Business Laws

Unit 4: Law of Negotiable Instruments

was accepted, endorsed, negotiated, or transferred for consideration.” As the consideration Notes
in a negotiable instrument is presumed, the party denying the same has to prove his case.
4. Time bills (usance bills): Time bills, also called as usance bills, are bills payable at a fixed
period after date or sight of the bills. Thus, a bill of exchange drawn payable at 3 months
after the date it is drawn is a time or usance bill. Similarly, a bill drawn payable at 90 days
after sight is again a time or usance bill. A time bill may also be made payable at a fixed
period after an event which is certain to happen. Hence, a bill payable at 90 days after the
death of the drawer will be a valid time bill.
5. Demand bills: A bill of exchange or a promissory note is payable on demand when it is
made payable ‘on demand’ or ‘at sight’ or ‘on presentation’ (s.21). Thus, no time for
payment is mentioned therein (s.19).
6. Clean and documentary bills: It is a common practice in home as well as foreign trade to
deliver to the banker along with the bills of exchange, the documents to title to the goods
(for example, Lorry Receipt, Railway Receipt or Bill of Lading). Where the banker is
instructed to deliver to the drawee of the bill the documents of title against acceptance of
the bill, the bill is called as Documents against Acceptance of Bill (D/A Bill), and where the
documents are to be released only against payment, it is called as Documents against
Payment of Bill (D/P Bill.) Where no documents of title to goods are enclosed to the bill,
it is called a clean bill.

Acceptance of Bills

The acceptance of a bill is the indication by the drawee of his assent to the order of the drawer.
Section 7 says that an acceptance is the signature of the drawee of a bill who has signed his assent
upon bill and delivered it or given notice of such signing to the holder or to some person on his
behalf. After acceptance, the drawee is known an acceptor. Writing the word ‘accepted’ is immaterial
to the establishment of the drawer’s responsibility. But, an oral acceptance or writing of the words
accepted without the drawee’s signature is not an acceptance. An acceptance to be valid must be (a)
in writing, (b) signed by the drawee or his agent (c) on the bill of exchange and (d) completed by
delivery to the holder or by notice of acceptance to him or some person on his behalf.

1. Kinds of acceptance: An acceptance of a bill may be general or qualified.
2. General acceptance: A general acceptance is an acceptance without any condition or
qualification. Where the drawee accepts the order of the drawer in absolute, i.e., without
adding any condition regarding payment, the acceptance is a general acceptance.
3. Acceptance for honour: When a bill of exchange has been noted or protested for non-
acceptance for the better security and any person accepts it supra protest for honour of the
drawer or of any one of the endorsers, such person is called an acceptor for honour (s.7).
The question of acceptance for honour does not arise in the case of promissory notes or
cheques.
4. Presentment for acceptance (s.61): It is only bills of exchange that require presentment for
acceptance and that too not all but certain kinds of bills only. Bills payable on demand or
on a fixed date need not be presented for acceptance. But the following bills must be
presented for acceptance otherwise the parties to the bill will not be liable on it. (i) a bill
payable after sight. Such a bill has to be presented for acceptance to fix maturity of the bill,
(ii) a bill that contains an express stipulation that it should be presented for acceptance
before it is presented for payment.

In case where presentation for acceptance is not necessary but optional, it is always desirable
to get a bill accepted as soon as possible, in order to obtain (a) the additional security of the

LOVELY PROFESSIONAL UNIVERSITY 85