PROF. RAJARSHI CHAKRABORTY SESSION 4 6/25/2016

 NEGOTIABLE INSTRUMENTS ACT 1. Introduction 2. Definition and features 3. Parties to negotiable instruments 4. Dishonour and Discharge 6/25/2016

 The word negotiable denotes transferable from one person to another in return for consideration.  The word instrument denotes a written paper which provides a right in favour of some person.  A negotiable instrument is a written paper which entitles a person to a certain sum of money and which is transferable from one person to another by mere delivery or by endorsement and delivery.  Endorsement means writing on an instrument.  Bearer is a person who owns the instrument  A negotiable instrument is a specialized type of "contract" for the payment of money that is unconditional and capable of transfer by negotiationcontract  A negotiable instrument is not a contract, as contract formation requires an offer, acceptance, and consideration, none of which is an element of a negotiable instrument offer, acceptanceconsideration 6/25/2016

 It means a promissory note, bill of exchange or a cheque payable either to order or to the bearer,  A promissory note is a written promise by the maker to pay money to the payeepromissory note  A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee  Negotiable Instruments is an exception to the maxim of law nemo dat quod non habet ( no person can transfer a better title than he himself has)  This Act came into force on 1 st March, /25/2016

 Freely TRANSFERABLE: the Instrument should be freely transferable from one person to another by a) Delivery in case the Instrument is payable to bearer. b) By endorsement and delivery if it is payable to order,  Holder’s title free from all defects: A person who takes an Instrument for value is called a holder. His title remains the same. 6/25/2016

 The holder in due course can sue upon a Negotiable Instrument in his own name for the recovery of the amount.  A negotiable Instrument can be transferred any number of times, till its maturity. Applicable presumptions to negotiable instruments are a) Consideration b) Specific Date c) Reasonable time of acceptance d) Transfer time before maturity e) Endorsements made in the same order in which they appear. f) Duly signed and stamped. 6/25/2016

 Negotiable instruments by statute. a) Promissory Notes: it is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker (the person who makes the promissory note and promises to pay) to pay a certain sum of money to, or to the order of, a certain person or to the bearer of the Instrument. 6/25/2016

b) Bill of Exchange: it 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. PARTIES to the Bill of Exchange: a) Drawer: it is the person who makes the bill of exchange and who gives the order to pay. b) Drawee: it is the person who is directed to pay c) Payee : the person to whom the payment is to be made. 6/25/2016

c) CHEQUE: a cheque is a bill of exchange with two additional feature, 1) It is always drawn on a specified banker. 2) It is always payable on demand and not otherwise. Special features of a cheque a) All cheques must be in writing b) On a specified banker only c) Fixed and certain sum of money d) Payee to be certain e) Cheques should be unconditional f) It must have a clear amount g) Payable on demand h) It should be dated. 6/25/2016

 Instruments negotiable by custom of usage: when an instrument is by the custom of trade transferable, like cash, by delivery and is capable of being sued upon by the person holding it for the time being, there it is entitled to the name negotiable Instrument and the property in it passes to a bona fide transferee for value 6/25/2016

 Dishonour by non acceptance The circumstances when a bill will be considered as dishonoured by non acceptance are a) When the drawee does not accept it within 48 hrs from the time of non acceptance b) When presentment for acceptance is excused and it remains unaccepted c) When the drawee is a person incompetent to contract d) When the drawee could not be found after a reasonable search e) When one or more of the draweerefuse to accept the bill 6/25/2016

 Dishonour by non payment : a negotiable instrument is said to be dishonoured by non payment, when the maker, acceptor and drawee, as the case may be, makes default in payment upon being duly required to pay the same. A negotiable instrument is also dishonoured by non payment is excused and the instrument remains unpaid after maturity. 6/25/2016

 An instrument is said to be discharged when all the rights of action under it are completely extinguished.  When it ceases to be negotiable.  When the party ultimately liable to the instrument is discharged from the liability.  After it is discharged the rights against all the parties there to come to an end. 6/25/2016

 When the party primarily liable on the instrument (the maker of the note, acceptor of the bill or the drawee bank) make the payment in due course to the holder at or after maturity.  When the maker of a note or the acceptor of a bill becomes its holder after maturity in his own rights.  When the party primarily liable becomes insolvent.  When the instrument is intentionally cancelled by the holder or by one of his agent. 6/25/2016

 ‘A’ sold a large quantity of tires to ‘B’ at a certain price on entering into a covenant that not to sell the tires below the price mentioned in price list supplied by ‘A’. ‘B’ sold the tires to ‘C’ a retail dealer under a contract stipulating the same covenant as between A and B. ‘C’ sold the tires at less than the list price. ‘A’ sued ‘C’ for the breach of the contract. Explain the following-  (a) To what extent ‘A’ would be successful in filling the suit against ‘C’ for the breach of the contract.  (b) Explain the law applicable in the above illustration under the Indian Contract Act, /25/2016

. Sri Nandan lal (from Karnataka)enters into a contract to supply 500 tonnes of rice to Bhandary (Kerala) within 4 months. Since the Government made some restrictions on the inter state movement of rice Nandan lal could not supply rice to Bhndary in time. There were restrictions but not prohibition of inter state movement Namdan takes the plea that performance of contract is impossible and intends to get the contract discharged. Examine whether this contract is discharged 6/25/2016

 Pramukhee purchased a Demand draft from Canara Bank Koramangala Bangalore in favour of Sulatanchand &sons payable at Canara Bank Karol Bagh New Delhi. Name Drawer, Drawee and Payee in this instrument. 6/25/2016

 Please mention with reasons whether following are Fraud or not? ◦ A sold his car to his son B. The car had defective engine which A was aware of. A said nothing to B about the defect in the car engine. ◦ A told his wife B within the hearing distance of his daughter C, that the bridegroom proposed for her was a young man. However the bridegroom was about 60 years of age. C’s consent was taken by fraud, misrepresentation or mistake? 6/25/2016

 A post of Assistant was offered to Anand by Bhaskar. Anand asks for a day to consider the offer to which Bhaskar agrees. At the end of the day Anand returns to Bhaskar to signify his acceptance of the offer, but he is told by Bhaskar that the post has been given to another person. Examine whether Anand can file a suit against Bhaskar 6/25/2016

 Prabhakar a film producer engaged Ramya a minor girl to act in his film and for this he entered into an agreement with Ramya’s father.Prabhakar fails to pay Ramya the remuneration under the agreement and Ramya sues the producer, through her father for the remuneration. Examine whether the suit is maintainable. 6/25/2016