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LAHORE BUSINESS SCHOOL

Subject: Business Law

Assignment On: Negotiable Instruments

Submitted to: Miss Noor

Group members:M. Usman Saleem ME01083-040Muhammad imran ME01083-013

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NEGOTIABLE INSTRUMENTS

INTRODUCTION:

Exchange of goods & services is the basis of every business activity. Goodsare bought and sold for cash as well as on credit. All these transactionsrequire flow of cash either immediately or after certain time. It is difficult andrisky to make and receive payments in cash. Therefore businessmen usecertain documents. Some of these are discussed in detail in the followingpages.

MEANING:

Negotiable refers to Freely TransferableInstrument refers to Written Document

A written document which creates a right in favor of some personand which is freely transferable

NEGOTIABLE INSTRUMENT ACT 1881

Definition:

A negotiable instrument means a promissory note, bill of exchangeor cheque payable either to order or bearer(Section 13(1))

CHARACTERISTICS

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The essential characteristics ofNegotiable Instruments are as follows:

Freely transferable:The Right of Ownership in these instruments can be transferred from

one person to another easily if the instrument is payable to bearer, theproperty in negotiable instrument transfers to the transferee by delivery. Ifinstrument is payable to order, the property in negotiable instrumenttransfers by endorsement and delivery.

Rights of the Holder:A holder of negotiable instrument has a right to recover the money

from the person liable on the instrument. The holder can recover amounthimself or transfer his rights to another person called transferee who can suethe person liable in his own name in case or dishonor.

Title of Holder in due course:A person taking the negotiable instrument in good faith, without

negligence and for value becomes holder in due course. He gets theinstrument free from all defects a holder in due course gets a better titleeven the title of the transferor might be defective.

Promise OR Order:It contains an unconditional promise or order to pay.

Certain Amount:In negotiable instruments, the promise or order is made for the

payment of certain amount.

Presumptions:Some presumptions of law apply to all negotiable instruments such as:

Negotiable instrument for consideration

Dated

Reasonable time of acceptance

Stamped

Transfer before maturity

Examples of Negotiable Instruments

Promissory Notes

Bills of Exchange

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Cheques

Dividend Warrants

Share warrants

Bearer Debentures

Here we discussing only three main instruments

PROMISSORY NOTE

Definition:

A promissory note is an instrument in writing (not being a banknote or a currency note) containing an un conditional undertaking,

signed by the maker, to pay on demand or at a fixed ordeterminable future time a certain sum of money only to, or toorder of, a certain person, or to the bearer of the instrument.(Section 4)

SPECIMEN

A specimen of Pro note is given below:

PARTIES TO PRO NOTE:

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Following two parties to pro note

Maker: the person who makes the promissory note or the person whopromises to pay is called maker.Payee: the person with whom, the promise is made to pay is called payee

In the above specimen

Maker Winning Edge Inc.

Payee Charter State Bank

ESSENTIALS

Following are the Essentials ofPromissory Note:

In Writing:A promissory note must be in writing. A verbal promise to pay

is not a promissory note. The writing may be on any paper. It may be printedor typed.

Promise to pay:

There must be a promise or undertaking to pay, a mereacknowledgement of debt without a clear promise is not a promissory note.

Examples:1. I am liable to pay Rs 500 to Mr. Imran2. I have taken from Imran Rs 500 and I a accountable to him for the

same with interest.

The above instruments are not valid

Unconditional promise:It must contain unconditional promise to pay. The promise

must not depend upon happening of some uncertain event. It must beabsolute. If it contains a conditional promise, it is not a valid promissorynote.

Examples:1. I promise to pay as soon as I can

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2. I promise to pay Rs 700 after my marriage with C

The above instruments are not valid

Signed by maker:

It is necessary that maker must sign the promissory note.When the maker is illiterate, his thumb impression is sufficient.

Certain maker: The instrument must indicate who is liable to pay. Where

there are more than on makers, they may be liable jointly and individually.But alternative promisors are not allowed.

Examples:1. A note in the form I promise to pay to Imran Rs. 500 and signed by

Ali and also Usman is not valid.

2. A note in form I, X, promise to pay to Z Rs. 500 and signed by X oralso Y is a good note as against X only.

Certain Payee: The payee of a pro note must be a certain person. The

payees name can be indicated by his official designation. It may be payableto two or more persons jointly or individually.

Examples:1. A promissory note payable to the manager of the bank or the principal

of a college is regarded as payable to a certain person.

2. X signs a note as I promise to pay a sum of Rs. 500 to Y or Z is avalid note because payee is considered a certain person.

Certain Sum:It is necessary that the sum of money promised to be payable

must be certain and definite. If the amount to be paid is uncertain theinstrument will be not be a valid promissory note

Example:A note in form I promise to pay the Rs. 500 and all fines according to rules;;is not valid

Pakistani Currency:A promissory note containing a promise to pay a certain

amount in forghin currency is not a valid pro note. For a valid note, id mustcontain a promise to pay a certain amount in Pakistani currency.

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Example:A note sign by A, I promise to pay the Rs.500 on 1st January next is a validnote.

Other formalities:

Some other formalities are also necessary

The place should be mentioned where it is made.

The date should be mentioned on which it is made.

The promise to pay must be for lawful consideration.

It must be properly stamped under the stamp act.

IMPORTANT POINTS:

The following points regarding Pro note are important.

A note payable only to a particular person is valid even though it is nota negotiable instrumentals it restricts its transferability.

A pro note can not be originally made payable to bearer because Statbank of Pakistan prohibits the issue of such promissory note.

It can be drawn payable to order originally

On endorsement in blank it can become payable to bearer

A bank note or a currency note is note a pro note as it is money itself.

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BILLS OF EXCHANGE

Section 5 of negotiable instrument act 1881 defines a BILL OF EXCHANGEas:

Definition:

A bill of exchange is an instrument in writing containing anunconditional order, signed by the maker, directing a certainperson, to pay a certain sum of money only to the order of, a certainperson or to the bearer of the instrument.

SPECIMEN

Parties to Bill of exchange:

Following are the three parties to a bill of exchange.

1. Drawer:

The person who makes the bill is called the drawer or the creditor.2. Drawee:The person who is directed to pay is called the drawee or the debtor.3. Payee:The person to whom, the payment is to be made is called payee.

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ESSENTIALS

Following are the essentials ofBILL OF EXCHANGE:

In writing:The bill of exchange must be in writing. A verbal order to pay cannot

be called bill of exchange. The law does not explain about writing. Inpractice, the bill of exchange is written on stamped paper or on form. It iswritten in link. It may be printed or typed.

Example:A draws a bill on b as: Pay Rs. 5000 to X or order. It is a valid bill.

Unconditional Order:The language used in a bill should convey an order to pay must not

depend upon the happening of an event. It must be unconditional.

Examplesa. A draws a bill on B, as Pay Rs. 5000 to C as early as possible. It is not

a valid bill.b. A draws a bill on B, as Pay Rs. 5000 to C or order. It is a valid bill as it

is unconditional.c. A draws a bill on B, as Mr. X please let the bearer have Rs. 500 and

obliged. It is not a valid bill as it contains a request and not an order.

Signed by Drawer:It must be signed by the drawer. The signature may be in any part of

the instrument and not necessarily at the bottom. If the drawer is illiteratehis thumb impression is sufficient.

ExampleA draws a billion B Pay Rs. 1000 to X or order but dose not sign

thereon. It is not a valid bill.

Certain Drawee:The drawee of a bill of exchange must be a certain person. The nameof the drawee of a bill of exchange must be mentioned in the bill. If the billdose not mentions the name of the drawee it is not a valid bill.

ExampleX draws a bill as: Pay Rs. 10000 to Y or order. it dose not mentioned the

name of the drawee so it is not a valid bill.

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Certain Payee:The payee of a bill must also be a certain person. The payees name

can be indicated by his official designation only. A bill may be made payableto two or more payees jointly or it may be made payable in the alternative to

one of two or one or some of several payees. (section. 13(2))

Examples:1. A draws bill as under2. Pay Rs.500 to principal of LBS3. Pay Rs 500 to X or Y4. Pay Rs.500 to M and N

The above Bills are valid.

Certain Sum:It is also essential that the some payable must be certain and definite.

If the amount ordered to be paid is uncertain the instrument cannot be calleda valid bill of exchange.

Example:M draws a bill on N as pay to X Rs.500 and all the other sums due to him itis not a valid billX draws a bill on N as pay to X Rs. 500 on 1st June 2001 it is a valid bill.

Term of Currency:

It is necessary that the payment must be made in currency and notany thing else. If the bill contains an order to pay money and some thingaddition to money it can not be a valid bill.Example:A draws a bill on B as pay Rs.500 and delivered 100 bags of wheat to X itis not a valid bill

Other formalities:Other formalities like Date, Place, Attestation, Consideration etc. are

usually mentioned in the bill but they are not essential in law.

IMPORTANT POINTS:

A bill of exchange directing to pay only to a particular person isvalid. But it is not negotiable instrument according to the definitionbecause its transferability is restricted.

A bill can be originally drawn payable to bearer but it must bepayable otherwise than on demand. (Say three months after date) inother word a bill cannot be drawn payable to bearer on demand.

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A bill drawn payable on demand must be made payable or order

CHEQUE

Definition:Section 6 of negotiable instrument act 1881 defines a cheque as:

cheque is a bill of exchange drawn on a specified bank and notexpressed to be payable otherwise than on demand

SPECIMEN

Parties to Cheque:

Following are the three parties to a bill of exchange.1. Drawer:

The person who draws the cheque is called the drawer. The drawer of thecheque is an account holder of the bank on which he draws the cheque.

2. Drawee:The bank on which the cheque is drawn is known as drawee.

3. Payee:The person to whom, the cheque is made payable is called payee.

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In the above specimen

Drawer Muhammad Ijaz, who signed the Cheque

Drawee the Atlas Bank

PayeeShips & wheel Freight Co

ESSENTIALS

Following are essentials of a CHEQUE:

In writing:The cheque must be in writing. Cheques which are printed or made out

on a type writer are also valid. Banks discourage this practice because suchcheques can easily be altered. Customer should be encouraged to drawcheques in ink. Cheques prepared in led pencils are returned as unpaid.

Examples:1. A draws a cheque in following terms2. Pay usman or bearer Rs. 5003. Pay usman Rs 500

The above cheques are valid.

Unconditional Order:It must contain an order to pay unconditionally. If the bank is ordered

to pay upon the condition of payees assigning the receipt then theinstrument is a conditional order and thus not a cheque.

Signed by Drawer:A cheque will be valid only if it is signed by the account holder or by

some one who is authorized to sign on his behalf.

Payable on demand:A cheque is always drawn payable on demand. The demand should be

made within a reasonable time. In Pakistan the cheques must be presentedwithin six months from the date of issue.

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of the cheque to the account of the payee. The crossing providesprotection to the holder of account.

CROSSING OF CHEQUE

Meaning:A cheque is said to be crossed when two parallel transverse lines aredrawn on the left corner of the cheque.

Purpose:The purpose of crossing is to give a direction to the bank not to pay thecheque across the counter but to pay it only to a bank.

TYPES OF CROSSING

There are two types of crossing

1. General crossing: where a cheque bears across its face an additionof the words and company or any abbreviation therof, between thetwo parallel lines, or of two parallel transverse lines simply, either withor without the words not negotiable that addition shall deemed acrossing, and the cheque shall be deemed to be crossing generally.(section 123)

2. Special Crossing: where a cheque bears across its face an addition ofthe name of a bank ether with or without the words not negotiablethat an addition shall be deemed a crossing, and the cheque shall bedeemed to be crossed specially and to be crossed that bank. Thus,where a cheque is crossed specially the bank on whom it is drawn shallnot pay it otherwise than to the bank to whom it is crossed or his agent

for collection. The special crossing can be made as follows. (section124)

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DIFFERENTIATION

DIFFERENCE BETWEEN BILL OF EXCHANGE & PROMISSORY NOTE

BILL OFEXCHANGE

PROMISSORYNOTE

1. Number of Parties:In a bill of exchange there are threeparties i.e. the drawer, the draweeand the payee.

2. Nature of instrument:A bill contains an unconditional orderto pay.

3. Maker and payee:In a bill of exchange the drawer andthe payee may be the same person.

4. Maker:The creditor writes a bill of change.

5. Acceptance:A bill of exchange must beacceptance by the drawee before it ispresented for payment.

6. Nature of Liability:Liability of a drawer is secondary andconditional. The drawer is liable onlywhen the acceptor does not honorthe bill.

7. Copies:A foreign bill must be drawn in sets.

1. Number of parties:In a promissory note there are two

parties i.e. the maker and the payee.

2. Nature of instrument:A promissory note contains anunconditional promise to pay.

3. Maker and payee:In a promissory note the maker andthe payee are different person.

4. Maker:A promissory note is written by thedebtor.

5. Acceptance:A pro note needs no acceptance as itis written and signed by the personwho is liable to pay.

6. Nature of liability:Liability of maker of a promissorynote is primary and unconditional.

7. Copies:A promissory note cannot be drawnin set.

8. Payable to bearer:A promissory note cannot be

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8. Payable to bearer:A bill of exchange can be drawnpayable to bearer.

9. Notice of dishonor:

If the bill is dishonor the holder mustgive a notice of dishonor to all therelated parties.

10. Makers position: The drawer of a bill stands in andimmediate position or relation withthe acceptor not with payee.

originally made payable to bearerbecause only the Govt. can issuebearer promissory note.

9. Notice of dishonor:If the promissory note is dishonor, no

notice is necessary to the maker.

10. Makers position: The maker of the promissory notestands in immediate relation withpayee.

DIFFERENCE BETWEEN CHEQUE & BILL OF EXCHANGE

CHEQUE BILL OF EXCHANGE

1. Drawee:A cheque is always drawn on a bank.

2. Payable on demand:

A cheque is always payable ondemand.

3. Payable to bearer ondemand:

A cheque payable to bearer is void.

4. Printed form:It must be drawn in printed formissued by the particular bank.

5. Acceptance:A cheque does not requireacceptance of the drawee.

6. Stamp:A cheque must not be requiring anystamp.

7. Crossing:A cheque can be crossed.

8. Discounting:A cheque can be discounted from anybank.

9. Copies:A cheque cannot be drawn in sets.

1. Drawee:A bill of exchange can be drawn onany person including a bank.

2. Payable on demand:A bill of exchange may be drawnpayable on demand or at a certainfuture time.

3. Payable to bearer ondemand:

A bill of exchange payable to beareris Void.

4. Printed form:A bill of exchange can be drawn onany paper and there is no printedform.

5. Acceptance:A bill of exchange must be acceptedby the drawee before it is presentedfor payment.

6. Stamp:A bill of exchange must be stamped.

7. Crossing:A bill of exchange cannot be crossed.

8. Discounting:A bill of exchange can be discounted.

9. Copies:

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10. Purpose: The main purpose of cheque is tominimize the use of metallic money.

11. Cancellation:Payment of cheque can be cancelledby the notice of customer.

12. Noting or protest: There is no system of noting andprotesting in the case of cheque.

13. Grace days:Cheque is always payable on demandso there is no question of allowinggrace days.

A foreign bill of exchange is drawn insets.

10. Purpose:The bill of exchange is drawn for the

purpose of receiving and givingcredit.

11. Cancellation: The payment of bill cannot becancelled.

12. Noting or protest: There is system of noting andprotesting in case of dishonor of abill.

13. Grace days:A grace period of 3 days is allowed inthe case of bill of exchange.

DIFFERENCE BETWEEN CHEQUE & PROMISSORY NOTE

CHEQUE PROMISSORY NOTE1. Maker:

Maker of a cheque i.e. the drawer is aperson who has an account in a bank.

2. Number of parties:There are three parties to a chequenamely drawer, drawee and thepayee.

3. Order or promise:A cheque contains an order to pay.

4. Payable on demand:A cheque is always payable on

demand.

5. Payable to bearer:A cheque may be drawn payable tobearer.

1. Maker:Maker of promissory note is a personwho owes some money to another

person.

2. Number of parties:There are two parties to promissorynote namely maker and payee.

3. Order or promise:A promissory note contains a promiseto pay.

4. Payable on demand:

A promissory note may be payable ondemand or it maybe payable at afixed or determinable future time.

5. Payable to bearer:A promissory note cannot beoriginally made payable to bearerbecause only the Govt. can issuesuch note.

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6. Grace days:A cheque is always payable ondemand therefore, no grace days areallowed to the drawee for itspayment.

7. Stamp:No revenue stamp is required on thecheque.

8. Printed:A cheque is always written on theprinted form.

9. Stopping the payment:The drawer can stop the payment of

a cheque after its issue.

10. Crossing:A cheque can be crossed.

6. Grace days:While calculating maturity date of apromissory note that is not payableon demand three grace days areallowed.

7. Stamp:A revenue stamp according to thevalue of the promissory note must beaffixed.

8. Printed:A promissory note can be made onany paper.

9. Stopping the payment: The maker of the promissory note

cannot stop the payment after itsissue.

10. Crossing:A promissory note cannot be crossed.

DIFFERENCE AMONG PROMISSORY NOTE, BILL OF EXCHANGEAND CHEQUE

PROMISSORY NOTE BILL OF EXCHANGE CHEQUE1. Maker:

A promissory note iswritten by the debtori.e. the person who isliable to pay.

2. Number of parties:

In the promissory notethere are to parties i.e.

the maker and thepayee.

3. Maker andpayee:

In the promissory notethe maker and thepayee are different

1. Maker:A bill of exchange iswritten by, the creditori.e. the person who hasright to demand thepayment.

2. Number of parties:

In a bill of exchangethere are three parties

i.e. the drawer, thedrawee and payee.

3. Maker andpayee:

In a bill of exchange thedrawer and the payeei.e. may be the sameperson.

1. Maker:A cheque is written bythe person who has anaccount in the bank.

2. Number of parties:

There are three partiesto a cheque namelydrawer, drawee and the

payee.

3. Maker andpayee:

In a cheque also thedrawer and the payeemaybe the sameperson.

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persons.

4. Drawee:There is no drawee of apromissory note.

5. Promise ororder:

A promissory notecontains anunconditional promiseto pay.

6. Acceptance:A promissory noteneeds no acceptance as

it is written and signedby the person who isliable to pay.

7. Nature of liability:

Liability of maker ofpromissory note to thepayee or the holder isprimary andunconditional.

8. Pay able tobearer:

A promissory notecannot be originallymade payable to bearer.

9. Payable ondemand:

A promissory notemaybe made payable

on demand or at aaffixed or determinablefuture time.

10. Copies:A promissory note cannot be drawn in sets.

4. Drawee:Drawee of a bill of exchange may beanyone including bank.

5. Promise ororder:A bill of exchangecontains anunconditional order topay.

6. Acceptance:A bill of exchange mustbe accepted by thedrawee before it is

presented for payment.

7. Nature of liability:

A bill of exchange to thepayee or the holder issecondary andconditional.

8. Pay able to

bearer:A bill of exchange canbe drawn payable tobearer but not ondemand.

9. Payable ondemand:

A bill of exchange maybe made payable ondemand or at a fixed or

determinable futuretime.

10. Copies:A foreign bill of exchange must bedrawn in sets

4. Drawee:Drawee of a cheque isalways a bank.

5. Promise ororder:A cheque is alsocontains anunconditional order topay.

6. Acceptance:A cheque dose notrequire acceptance of

the drawee before itspayment.

7. Nature of liability:

Liability of the drawer ofa cheque to the payeeor the holder is primary.

8. Pay able tobearer:

A cheque is alwayspayable on demand itcan also be madepayable to bearer andon demand.

9. Payable ondemand:

A cheque is alwaysdrawn payable on

demand.

10. Copies:A cheque cannot bedrawn in sets.

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11. Gracedays:

Three garce days areallowed to maker whilecalculating maturity

date of a promissorynote payable otherwisethan on demand.

12. Stamp:A revenue stampaccording to value ofthe promissory note isaffixed.

13.Stopping

payment: The maker of apromissory note cannotstop the payment afterits issue.

14. Crossing:A promissory not cannotbe crossed.

15. Printed :A promissory note canbe made on any paper.

11. Gracedays:

Three grace days arealso allowed to thedrawee/accepter of a

bill of exchangepayable otherwisethan on demand12. Stamp:

A revenue stampaccording to the bill ofexchange is affixed

13.Stoppingpayment:

The drawer of a bill

of exchange cannotstop the payment ofthe bill after itsacceptance by thedrawee.

14. Crossing:A bill of exchangecannot be crossed.

15. Printed :

A bill of exchange canbe drawn on any paper.

11. Gracedays:

A cheque is alwayspayable on demand.

12. Stamp:No revenue stamp isaffixed on the cheque.

13.Stoppingpayment:

The drawer of acheque

can stop the paymentafter its issue.

14. Crossing:A cheque can becrossed.

15. Printed :

A cheque is alwaysdrawn on the printedperforma issue thebank..

CLASSIFICATION OF NEGOTIABLE INSTRUMENTS

1. Inland instrumentA note, bill or cheque drawn or made in Pakistan payable in, or drawn

upon any person resident in Pakistan shall be deemed to be an inlandinstrument. (sec. 11)

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2. Foreign instrumentAny such instrument not so drawn, made , or made payable shall be

deemed to be a foreign instrument. It means an instrument which is not aninland instrument is deemed to a foreign instrument (sec.12)

3. Bearer instrumentA negotiable instrument is payable to bearer which is expressed to be

so payable or on which the only or last endorsement is an endorsement inblank. When an instrument is payable to bearer, the holder of it is entitled toreceive the payment. (Section 13)

4. Order instrumentA note, bill, or cheque is payable to order which is expressed to be so

payable or which is expressed to be payable to a particular person and dosenot contain words, prohibiting transfer or indicating an intention that it shall

not be transferable (Section 13(1))

5. Ambiguous instrumentAn instrument which cannot be clearly identified either as promissory

note or as a bill of exchange is an ambiguous instrument. It is a faultyinstrument. Its holder may treat it as a bill of exchange or promissory note,

For exampleWhen in a bill the drawer and the drawee are the same persons. Sec.

17)

6. Different in figures and wordsIf the amount under taken or order to be paid is stated differently in

figures and in words, the amount stated in words shall be the amountundertaken or ordered to be paid provided that if the words are ambiguousor uncertain, the amount may be ascertained by referring to the figures. (Sec.18)

7. Instrument pay able on demand:A note or bill payable on demand (a) where t is expressed to be so or

to be pay able at sight or on presentment or (b) where no time for paymentis specified init or (c) where the note or bill accepted or indorsed after it is

over due, as regards the person accepting or indorsing it the expressions, ;at sight and presentment means on demand.

8. Inchoate instrument:It is an incomplete instrument. A person signs and delivers to another,

a blank or in complete stamped instrument and authorizes the other person

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to convert it into negotiable instrument by filling the blanks. When theinstrument is filled up the signer becomes liable on the instrument. Thesigner is liable to the amount specified therein but not exceeding the amountcovered by the stamp. But no person other than a holder in due course shallrecover from the person delivering the instrument anything in excess of the

amount intended to be paid by him. (Sec. 20)

9. Time instrument:A time instrument means the instrument in which time for payment is

mentioned. A note or bill is a time instrument when it expressed to bepayable (a) after a specified period (b) on a specific day (c) after sight (d) onthe happing of event which is certain to happen.The expression after sight means (a) in a note , after presentment for sight(b) in a bill, after acceptance or noting for non-acceptance or protest for non-acceptance . a cheque cannot be a time instrument because the cheque isalways payable on demand (sec.21)

10.Fictitious bill:

A fictitious bill is a bill in which the name of the drawer or the payee orboth is fictitious. When both the drawer and payee of the bill are fictitiouspersons, the acceptor is liable to holder in due course if the holder in duecourse can show that the signature of the supposed drawer and that of thefirst endorser (payee) are in the same handwriting. (sec. 42)

11.Accommodation bill:An accommodation bill means a bill which is drawn and accepted

without consideration. The accommodated party cannot, after he has paid

the amount of the bill, recover the amount from any party who became aparty to the bill for his accommodation. The holder in due course mayrecover the amount of such bill from any prior party. The partyaccommodation is called the accommodation party. The partyaccommodated is called the accommodated party. (Sec. 43)

12.Undated bill:When the date of a bill is not mentioned and where the date of the

acceptance of a bill, payable at a fix period after sight to omitted, any holdermay insert the true date of issue or acceptance as the case may be and suchinsertation is valid. The instrument can not be considered invalid merely

because it is undated.

13.Bank Draft:It is an order issued by one bank to another bank or to its branch to

pay a specified some of money to a specified person or his order. It is anegotiable instrument like a cheque. Its payment cannot be stopped. It isalso known as demand draft

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14.Bills in sets:Bill of exchange drawn in parts is called bills in sets. Some provisions

relating to bills in sets are (a. each part must be numbered b) each part mustcontain a provision that it shall continue to be payable only so long as the

other parts remain unpaid. C) Each part must contain reference to otherparts. D) Each part must be signed and delivered by drawer. e) all the partsof the whole set need not be accepted. F) when a person accepts r endorsesdeferent part of the bill in favor of different persons, he and the subsequentendorsers of each part are liable on such parts as a it where a separate bill.(Section 132)

15.Documentary bill:When documents relation to the goods represented by the bill e.g. bill

of lading and railway receipt, are attached to a bill. The bill is called adocumentary bill.

16.Clean bill:When no document of title relating to the goods and other documents

are attached to the bill it is called a clean bill

17.Trade Bill:A bill may be trade bill or accommodation bill. When a bill is drawn,

accepted, or endorsed for consideration, t is called a trade bill.

MATURITY OF NEGOTIABLE INSTRUMENTS

Maturity means the date on which the payment of instrument falls due. Theinstrument payable on demand becomes payable immediately. The chequeis always payable on demand so there is no question of its maturity. Aninstrument which is not payable on demand becomes mature on the thirdday after the day on which is expressed to be payable. These 3 days arecalled Days of Grace

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