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12th Standard English Medium Commerce Subject The Negotiable Instruments Act, 1881 Book Back 3 Mark Questions with Solution Part - I updated Book back Questions | QB365

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12th Standard English Medium Commerce Subject The Negotiable Instruments Act, 1881 Book Back 3 Mark Questions with Solution Part - I updated Book back Questions

Published on: 13/05/2022

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Questions:

Generic 3

5 x 3 = 15

Draw the two different types of crossing.

Distinguish between Bill of Exchange & Promissory Note.

What are the characteristics of a bill of exchange?

Distinguish between Negotiability and Assignability.

Explain the nature of a Negotiable Instrument.

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Answers Key:

Generic 3

5 x 3 = 15

Crossing is of two types: General crossing and special crossing
General Crossing:
1. It is according to section 123 of the Negotiable Instruments Act, 1881.
2. "Where a cheque bears across its face with 'and company" or any abbreviation between two parallel transverse lines with or without the words 'not negotiable, the cheque shall be deemed to be crossed generally':
Special Crossing:
1. It is according to section 124 of the Negotiable Instruments Act, 1881.
2. "Where a cheque bears across its face an addition of the name of a banker with or without the words 'not negotiable, the cheque shall be deemed to be crossed specially and to be crossed to the bankers".

SI.No.	Basis of Difference	Bill of Exchange	Promissory Note
1.	Nature of Undertaking	A bill of exchange contains an unconditional order to pay money.	A promissory note contains an unconditional undertaking to pay money.
2.	No. of Parties	There are three parties in a bill of exchange drawer, drawee and payee.	In a promissory note, there are only two parties the maker and the payee.
3.	Drawer of the instrument	A creditor draws a bill on a debtor.	A debtor executes a promissory note in favour of a creditor.
4.	Conditionality	A bill may be accepted conditionally.	A note cannot be made conditional.

Characteristics of a bill of exchange
(i) A bill of exchange is a document in writing.
(ii) The document must contain an order to pay.
(iii) The order must be unconditional.
(iv) The instrument must be signed by the person who draws it.
(v) The name of the person on whom the bill is drawn must be specified in the bill itself.
(vi) The amount that isrequired to be paid must also be specified in the bill.

SI.No	Basis of Difference	Negotiability	Assignability
1.	Legal ownership	It passes to the transferee by mere endorsement in the case of a bearer instrument and by endorsement and delivert in the case of an order instrument.	An assignment can be made by observing certain formalities. For instance, an instrument is to be made in writing, duly stamped and igned by the transferor or his agent.
2.	Notice	Notice is not necessary for the holder of negotiable instrument to claim the payment from the debtor.	In case of actionable claim, notice of the assignment by the transferee regarding the transfer of debt to the debtor is necessary.
3.	Nature of title	Holder of negotiable instrument in due course gets a better title than even the transferor.	The transferee's title to the instrument is subject to the defects of the transferor's title.
4.	Consideration	Consideration is presumed	The assignee has to prove the consideration for the transfer.

(i) The word 'Negotiable' means transferable from one person to another in return for consideration
(ii) The word 'Instrument' means a written document by which a right is created in favour of certain person.
(iii) A negotiable instrument is a document which entitles a person to a certain . sum of money and which is transferable from one person to another by mere delivery or by endorsement and delivery.
(iv) The law relating to negotiable instruments is dealt in the Negotiable Instruments Act 1881.
(v) This Act speaks about promissory note, bills of exchange and cheques.