1. Negotiable Instruments

2. Definition of Negotiable Instrument
Means a promissory note, bill of exchange and cheque payable either to order or to the bearer

3. Characteristics Freely transferable Title of the holder Recovery
Presumptions
Consideration
Date
Time of acceptance
Time of transfer
Order of endorsements
Stamp
Holder presumed to be a holder in due course
Proof of protest

4. Types of Instruments
Negotiable by Statute
Negotiable by Custom

5. Classification of Negotiable Instruments
Bearer Instruments
Order
Inland & Foreign
On Demand
Time
Accommodation bill
Fictitious
Documentary bill

6. Contd
Escrow
Ambiguous
Inchoate
Undated bills

7. Payment in Due Course Payment according to the apparent tenor
Payment on behalf of acceptor or drawee
The person must be in possession
Payment in good faith
No ground to believe that possessor is not entitled

8. Parties to Negotiable Instrument
Parties to bill of exchange – Drawer, drawee, Acceptor, payee, holder, endorser, endorsee
Parties to promissory note – maker, payee, holder, endorser, endorsee
Parties to Cheque – maker, drawee, payee, holder, endorser, endorsee

9. Holder & Holder in Due Course
Holder – possession, to recover or receive the amount
Holder in Due Course – consideration, holds instrument before maturity, good faith

10. Privileges of a Holder in Due Course
Inchoate stamped instrument
Liability of prior parties
Fictitious payee
Without consideration
Conditional delivery
Cleansed of all defects
Unlawful means
Every holder is a holder due course

11. Endorsement Must be on the instrument Signed by the endorser
Mere signature or signature & name of the party

12. Kinds of Endorsement Blank or general Full or special
Restrictive endorsement
Partial endorsement
Conditional indorsement

13. Discharge By payment Party primarily liable becoming holder
Express waiver
Cancellation
Contract

14. Discharge of Parties By payment Party primarily liable becoming holder
Express waiver
Cancellation
Contract
More then forty-eight hours
Non-presentment of cheque
Material alteration
Operation of law

15. Case Study
X Ltd a cotton textile company, enters into a contract with A Ltd, an adjacent cotton textile mill, to supply electricity from their power generation plant. After supplies have been made for 3 months it is discovered that this activity is beyond the scope of the objects clause of the memorandum of association of X Ltd. Share holders of X Ltd ratify the contract in their general body meeting. Can A Ltd which refuses to make payment on the ground that the contract is wholly null and void. Can A Ltd be compelled to make the payment?