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Essential of Bill of Exchange

The document discusses three types of negotiable instruments - promissory notes, bills of exchange, and checks. It provides the essential requirements for bills of exchange and checks to be valid, such as being in writing and containing an unconditional order to pay a certain amount. It also compares the three instruments and bills of exchange to promissory notes based on their definitions, sections in the Negotiable Instruments Act, parties involved, acceptance requirements, and liability.

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Faisal Naqvi
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374 views3 pages

Essential of Bill of Exchange

The document discusses three types of negotiable instruments - promissory notes, bills of exchange, and checks. It provides the essential requirements for bills of exchange and checks to be valid, such as being in writing and containing an unconditional order to pay a certain amount. It also compares the three instruments and bills of exchange to promissory notes based on their definitions, sections in the Negotiable Instruments Act, parties involved, acceptance requirements, and liability.

Uploaded by

Faisal Naqvi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

National University of Modern Languages

Lahore

After Mid Assignment # 7

M.Com-4(A) Morning

Submitted by: Zarqa rehmat

Roll # L-1185

Business Law

Submitted to: Sir Brig. Muhammad Saleem

Topic: Three types of Negotiable Instruments, their essentials &


comparing them.

Submission Date: 08-06-2020


Types of Negotiable Instrument

1. Promissory notes
2. Bill of exchange
3. Check

Essential of bill of exchange

A bill of exchange to be valid must fulfil the following requirements:

1. The instrument must be in writing.


2. The instrument must be signed by the drawer.
3. The instrument must contain an order to pay, which is express and unconditional.
4. The drawer, drawee and the payee must be certain and definite individuals.
5. The amount of money to be paid must be certain.

Essential of cheque

1. A cheque must be in writing.


2. It must contain an order to pay. Not a request to pay.
3. The order to pay must be unconditional.
4. A cheque must be drawn on a specified banker.
5. It must be drawn by the drawer of the cheque.
6. The cheque should be signed by the drawer.
7. The order to pay must be for payment of money only.
8. The order must be for the payment of certain sum of money.
9. The order must be expressed to be payable on demand.

Essentials of promissory note

A Promissory note to be valid and enforceable, the following essentials are to be satisfied :

1. The Promissory note must be in writing :


2. It must contain a promise/undertaking to pay certain sum of money :
3. The promise must be unconditional and certain :
4. It must be duly signed and delivered by the maker :

BASIS FOR CHEQUE BILL OF EXCHANGE


COMPARISON
Meaning A document used to make easy A written document that shows
payments on demand and can be the indebtedness of the debtor
transferred through hand delivery is towards the creditor.
known as cheque.

Defined in Section 6 of The Negotiable Section 5 of The Negotiable


Instrument Act, 1881 Instrument Act, 1881

Validity Period 3 months Not Applicable

Payable to bearer on Always Cannot be made payable on


demand demand as per RBI Act, 1934

Grace Days Not Applicable, as it is always 3 days of grace are allowed.


payable at the time of presentment.

Acceptance A cheque does not require acceptance. Bill of exchange needs to be


accepted.

Basis of Bill of Exchange Promissory Note


Comparison
Definition A negotiable instrument A negotiable instrument issued by
issued to order the debtor to the debtor with a written promise
pay the creditor a certain sum to pay the creditor a certain
of money within a specific amount within a specific date or
date or on demand. on demand.

Section Mentioned in Section 5 of the Mentioned in Section 4 of the


Negotiable Instruments Act, Negotiable Instruments Act, 1881
1881

Issued By Creditor Debtor

Parties Involved Three parties involved i.e a Two parties involved i.e a
drawer, the drawee and a drawer/maker and the payee
payee.

Acceptance Drawee needs to accept the No acceptance required from the


bill of exchange before drawee.
payment.

Liability Liability of drawer is Liability of drawer is primary and


secondary and conditional. absolute.

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