NEGOTIABLE INSTRUMENTS

Negotiable instruments are the most common credit devices and are freely used in commercial transactions from the very beginning. In business dealings, all the transactions do not take place in terms of cash and it is also not possible to carry huge amount of cash. So transactions are generally made on the basis of exchange of documents which have became the backbone of today's credit structure of the market bills of exchange, promissory note and cheques are the such documents which are called Negotiable Instruments the law relating to negotiable instrument in India contained in Negotiable Instrument Act 1881.

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Bills of exchange

Bills of exchange is also one of the important Negotiable instrument in India. It has been defined in section 5 of Negotiable Instrument Act 1881 as follows :- 'A bills of exchange is an instrument in writing containing an unconditional order signed by the maker of directing a certain person to pay a certain sum of money. Only two or the order of a certain person to the bearer of the instrument.' Usually there are three parties in bills of exchange. 1) Drawer - who makes the bill (seller) 2) Drawee - who accepts the bill (buyer) 3) Payee - who receives the amount. The specimen of bills of exchange is as follows :- On the basis of definition mentioned in section 5 following are the features of bills of exchange. 1) It must be in writing . 2) Itmust contain order to pay 3) It must be unconditional. 4) Bill must be signed by the drawer. 5) Bill must be accepted by the drawee. 6) The parties of bills of exchange must be certain. 7...

Pledge - section 172

Pledge is a special type of bailment where a movable thing is bailed as security for the repayment of debt or for the performance of a promise, so every contract by which the position of goods is transferred as security for repayment of a death is known as pledge. The term pledge has been defined in section 172 of Indian Contract Act 1872 as follows " Bailment of goods as security for payment of a depth or performance of a promise is called pledge. In this case the bailor is called pledger or pawnor and the bailee is known as pledgee for pownee and the relation between the two is pledge or Pawn. For example:- 1) 'A' took loan from the bank against the security of good . In this case 'A' is the pledger ,the bank is pledgee and gold is pledged to good. 2) Mohan pledged his goods with Ram. But now Mohan refuses to make the payment of the same . Ram now can either sell his goods or can initiate a suit proceeding against Mohan. from the above definition fo...

PROMISSORY NOTE

Promissory note is one of the important Negotiable Instrument in India it has been defined in Section 4 of Negotiable Instrument Act 1881 as follows:- " promissory note is an instrument in writing containing an unconditional undertaking (promise) , signed by she makes to pay a certain sum of a certain sum of money only to or the order of a certain person or bearer of the instrument. " From the definition, there are two parties of a promissory note. a) Maker - who makes the document promissory note. b) Payee - who is entitled to receive the money. A sample of Promissory note is as follows :- On the basis of above definition following are the features of promissory note. 1) It must be in writing. 2) There must be a promise or under taking to pay a certain sum of money. 3) The promise to make payment must be unconditional. 4) It must be definite about date & time etc. 5) It must be signed by the maker. 6) Parties to the promissory...

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