Negotiation

“When a promissory note, bill of exchange or cheque is transferred to any person, so as to continue

that person the holder thereof, the instrument is said to be

negotiated.”

DEFINITION

Takes Place in 2 Ways:

i. By Delivery

ii. By Endorsement and Delivery

Section 15 defines:-

“when the maker or holder of a negotiable instrument signs the same, otherwise than as such maker, for the purpose of negotiation, on the back or face there of or on a slip of paper annexed there to , or so signs for the same purpose a stamped paper intended to be completed as a negotiation instrument, he is said to endorse the same, and is called an “endorser”. the person to whom the instrument is endorsed is called the “endorsee”.”

Endorsement

Essentialsi. The holder writes and/or signs

on the face or back or on a separate paper or stamp paper.

ii. The instrument is delivered to the endorsee.

iii.The instrument is endorsed and delivered to the endorsee.

iv.Endorsement must be genuine and not forged.

Who may endorse ?

i. The holder of the instrumentii. The maker signing it

otherwise than as such maker.

iii. Every maker, drawer or endorsee

iv. The payee of an instrument

Effect

On endorsement, the endorsee acquires the property therein of the negotiable instrument. The endorsee gets the right to further negotiation unless specifically excluded or restricted.

Kinds of Endorsement

i. Endorsement in blankii. Endorsement in fulliii. Restrictive Endorsementiv. Partial Emdorsementv. Conditional Endorsementvi. Endorsement Sans Resourcevii.Facultative Endorsement

Negotiation Back is when the transferor again becomes the holder. In case of dishonor only parties prior to his first position

are liable. This is to avoid circuit of action.

Discharge from Liability

Whenever a valid negotiable instrument is created, the parties are liable to pay the amount due on the instrument. So long as the instrument is there , there are certain rights of actions available. However, when this rights come to end, the instrument is discharged and is not negotiable. Thus termination of liability of the parties is called ‘discharge from liability’.

Definition

two meanings

1.Discharge of negotiable instruments

2.Discharge of party or parties

Modes of Discharge of an Instruments

1.By cancellation

2.By discharge as a simple contract

3.By renunciation

4.By payment in due course

5.By the party primarily liable becoming the holder

Modes of Discharge of a Party or PartiesBy Qualified acceptance

By paymentBy releaseBy allowing drawee more than

48 hours for deliberationBy non-presentment of cheque

Modes of Discharge of a Party or Parties

By acceptor becoming a holder

Alteration not apparentMaterial alterationBy payment of chequeBy cancellationBy operation of law

(QP RAN HAM PCO)

Modes of Discharge of a Party or Parties

Material Alteration

Its an alteration which affects the rights and liabilities of parties. The instrument becomes void against

those parties who are liable prior to alteration. Material alteration does not affect the liabilities of persons,

who become liable after the alteration.

By:-Priya Bute

Sheetal KambliPranali Chandivade

Varsha SawantPrachi Pawle

Lavina Sandor