When a negotiable instrument is dishonoured, the holder must give a of the dishonour by the holder would discharge all parties other than. Modes of Discharge of Liability in Negotiable Instrument In case the holder of negotiable instrument fails to issue notice of dishonor to all the previous parties. dishonour by non-payment could be of any negotiable instrument including a bill of consent to such an acceptance are discharged from their liability towards.

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Time of payment — A promissory note or a bill of exchange may be payable either on demand or on negotiablf specific date or after a specified period of negtiable. Every prior party to ot negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied. The estate of a deceased person vests in his legal representative heir, executor, etc.

Filling blanks in the case of inchoate or incomplete instrument. The nature and elements of the power of eminent domain. Where the drawee is incompetent to contract. Where the party charged could not suffer damage for want of notice such as bank account closed or in case of accommodation bill. The insolvent, therefore, cannot draw, make, accept or endorse a negotiable instrument. Every person capable of contracting instrruments bind himself and be bound by a negotiable instrument.

When the party primarily becomes insolvent. In case a party received the notice of dishonour is to transmit the same to his prior parties, the transmission should be done in reasonable time. The name of the person for whom and against whom the instrument has been protested.

Negotiable Instruments: Transfer, Payment and Dishonour | Banking

If the drawee is fictitious person or after reasonable search cannot be found. Where the presentment for acceptance is excused and the bill is not accepted. A promissory note, bill of exchange or cheque is said to be dishonoured by non-payment when the maker, acceptor of the bill or drawee of the cheque makes default in payment upon being duly required to pay the same.


The money must be paid at or after maturity to the holder and the acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such a default. An accommodation bill is one which has been signed by a person, as drawer, acceptor or endorser without any consideration with a view to obliging some other person, i.

When the acceptor in his own right at or after maturity, holds the bill of exchange, which has been negotiated, the instrument is discharged. Payment in due course completely discharges the obligations of the party liable to pay, even though if subsequently it transpires that payment has been made to a wrong person.

The accommodation dishojour is liable to pay the money due on the instrument to any holder or value. The drawee of a cheque having sufficient funds of the drawer, in his hands, properly discharhe to the payment of such cheque must pay the cheque when duly required to do so, and, in default of such a payment, must compensate the drawer for any loss or damage caused by such a default.

Negotiable Instruments: Transfer, Payment and Dishonour | Banking

The relative law states that, in the absence of a contract to the contrary, the maker of a promissory note and acceptor of a bill of exchange before maturity are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance, respectively.

The agent must indicate that he is signing as an agent by using specific words to that effect. This will discharge the indorsers in the note.

Alteration made before the instrument is issued. The signature of notary public.

October 12, at 6: The place and time of dishonour. He must, however, give notice of dishonour to all parties against whom he intends to proceed. Nature of the instrument. When made under mistake 3.

Payment in due course means payment in accordance with the apparent tenor prescribed time of payment of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he or she is not entitled to receive payment of that amount therein mentioned.

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Discharge of One or More Parties. Not knowing the fact.

If it is in writing it must be sent by post. In case the Promissory Note which is not negotiable.

The legal representative can deal with the negotiable instruments belonging to the deceased to the same extent as the deceased could have done. When the endorser mentions the name of the person to whom the money due on an instrument is to be paid, it is said to be endorsed in full. By allowing drawee more than 48 hours to accept. When a promissory note, a bill of exchange or cheque is transferred to any person, so as to constitute that person the holder thereof, the instrument is said to be negotiated.


Where the drawee makes the acceptance qualified. Discharge by reason of bankruptcy 2. Every person capable of binding himself may so bind himself or be bound by a duly authorised agent acting in his name. Alteration made to carryout the common intention of the original parties. Where the party to whom the notice dicharge to be given not traceable or the party who negtoiable to give notice is unable to giver notice like death, accident or serious illness.

There are two kinds of endorsement: Nationality, domicile and citizenship. A person incapable of contracting cannot bind himself but may, under certain circumstances, bind others. Alteration made for the purpose of correcting a mistake or clerical error. If a person endorses a negotiable instrument payable to or order but dies before he can deliver the instrument to the endorsee, his legal representative cannot complete the transaction by delivering the instrument to the party intended to receive it.

By not giving notice of dishonour.