Negotiation In Banking Law, Study Guides, Projects, Research of Banking Law and Practice

Download Negotiation In Banking Law and more Study Guides, Projects, Research Banking Law and Practice in PDF only on Docsity!

NEGOTIATI

ON

Prepared by Tulip Suman Research Associate

■Negotiation is an act of the transfer

of a negotiable instrument under such circumstances so as to make the transferee the holder thereof

■The Act by which a bill of exchange

or a promissory note is put into circulation by being passed by one of the original parties to another person

S.

■Indorsement “in blank” and “in full”—‘‘Indorsee”

■If the indorser signs his name only, the indorsement is said to be “in blank”, and if he adds a direction to pay the amount mentioned in the instrument to, or to the order of, a specified person, the indorsement is said to be “in full”, and the person so specified is called the “indorsee” of the instrument

■The provisions of this Act relating to a

S.46 - Delivery

■The making, acceptance or

indorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive

■As between parties standing in

immediate relation; delivery to be effectual must be made by the party making, accepting or indorsing the

s.47 - Negotiation by delivery

■Subject to the provisions of section

58, a promissory note, bill of exchange or cheque payable to bearer is negotiable by delivery thereof

■(Exception) —A promissory note, bill

of exchange or cheque delivered on condition that it is not to take effect except in a certain event is not negotiable (except in the hands of a holder for value without notice of the

Illustrations

■(a) A, the holder of a negotiable instrument payable to bearer, delivers it to B’s agent to keep for B ■The instrument has been negotiated. ■(b) A, the holder of a negotiable instrument payable to bearer, which is in the hands of A’s banker, who is at the time the banker of B, directs the banker to transfer the instrument to B’s credit in the banker’s account with B ■The banker does so, and accordingly now possesses the instrument as B’s agent. The instrument has been negotiated, and B has become the holder of it.

S.

Instrument obtained by unlawful means or for unlawful consideration ■ When a negotiable instrument has been lost, or has been obtained from any maker, acceptor or holder thereof by means of an offence or fraud, or for an unlawful consideration ■ no possessor or indorsee who claims through the person who found or so obtained the instrument is entitled to receive the amount due thereon from such maker, acceptor or holder, or from any party prior to such holder ■ unless such possessor or indorsee is, or some person through whom he claims was, a holder

S.49 - Conversion of

indorsement in blank into

indorsement in full

■The holder of a negotiable instrument indorsed in blanks may, without signing his own name, by writing above the indorser’s signature a direction to pay to any other person as indorsee, convert the indorsement in blank into an indorsement in full; and the holder does not thereby incur the responsibility of an indorser.

Explanation

■Nothing in this section enables a maker or drawer to indorse or negotiate an instrument, unless he is in lawful possession or is holder thereof; or enables a payee or indorsee to indorse or negotiate an instrument, unless he is holder thereof ■Illustration A bill is drawn payable to A or order. A indorses it to B, the indorsement not containing the words “or order” or any equivalent words. B may negotiate the instrument.

S.52 - Indorser who excludes

his own liability or makes it

conditional ■The indorser of a negotiable instrument may, by

express words in the indorsement, exclude his own liability thereon, or make such liability or the right of the indorsee to receive the amount due thereon depend upon the happening of a specified event, although such event may never happen ■Where an indorser so excludes his liability and afterwards becomes the holder of the instrument all intermediate indorsers are liable to him.

53. Holder deriving title from holder in due course

■A holder of a negotiable instrument who derives title from a holder in due course has the rights thereon of that holder in due course

54. Instrument endorsed in

blank

■Subject to the provisions hereinafter contained as to crossed cheques, a negotiable instrument endorsed in blank is payable to the bearer thereof even although originally payable to order

56. Endorsement for part of

sum due

■No writing on a negotiable instrument is valid for the purpose of negotiation if such writing purports to transfer only a part of the amount appearing to be due on the instrument; ■but where such amount has been partly paid a note to that effect may be endorsed on the instrument, which, may then be negotiated for the balance

57. Legal representative cannot by delivery only negotiate instrument endorsed by deceased

■The legal representative of a deceased person cannot negotiate by delivery only a promissory note, bill of exchange or cheque payable to order and endorsed by the deceased but not delivered.