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Business Environment and Law-The Negotiable Instruments Act, 1881

Bill Of Exchange and its Characteristic: - Negotiable Instruments Act, 1881

   Posted On :  08.05.2018 05:34 am

A ‘bill of exchange’ is defined by Section 5 as “‘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 the order of, a certain person, or to the bearer of the instrument.”

Bill Of Exchange:
 
 
A ‘bill of exchange’ is defined by Section 5 as “‘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 the order of, a certain person, or to the bearer of the instrument.”

 

Characteristic features of a Bill of Exchange:

 
 
            It must be in writing.
 
            It must contain an order to pay and not a promise or request. Words, like ‘Please pay Rs. 10,000 to A on demand and oblige, do not constitute the instrument a bill of exchange.
 
            The order must be unconditional.
 
            There must be three parties, viz., drawer, drawee and payee.
 
            The parties must be certain.
 
            It must be signed by the drawer.
 
            The sum payable must be certain or capable of being made certain.
 
            The order must be to pay money and money alone.
 
            It must be duly stamped as per the Indian Stamp Act.
 
            Number, date and place are not essential. Oral evidence may be obtained as to date and place of execution.
 

Cheque:

 
 
A cheque is defined as ‘a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand’ (Section 6). Thus, a cheque is a bill of exchange with two added features, viz.: (i) it is always drawn on a specified banker; (ii) and it is always payable on demand and not otherwise.

 

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