Negotiable Instruments Act.

18632 Words75 Pages
The Negotiable Instruments Act, 1881 1. Negotiable Instruments Q. What is a negotiable instrument? Explain its special characteristics. 1. INTRODUCTION A negotiable instrument is an instrument which entitles a person holding it to a sum of money and which is transferable from person to person by mere delivery like cash. The transferee becomes entitled to the money and also to the right to further transfer it. By virtue of Sec. 13(1) “Negotiable Instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer, whether the words “order” or “bearer” appear on the instrument or not. Although the Act mentions only these three instruments, it does not exclude the possibility of adding any other instrument to the list if it satisfies the following two conditions of negotiability, viz.: (i) that it is by custom of trade transferable by delivery or by endorsement and delivery; and (ii) that it is capable of being sued upon by the person holding it pro tempore (for the time being) in his own name. 2. RELEVANT PROVISIONS The law relating to negotiable instruments is contained in the Negotiable Instruments Act, 1881. It deals with the promissory notes, bills of exchange and cheques. It extends to the whole of Pakistan. It came into force on 1st March, 1882. This Act does not affect the provisions of Sections 24, 33 and 35 of the State Bank of Pakistan Act, 1956. Moreover, no usage or custom shall apply to such instrument. 3. MEANING AND DEFINITION The word negotiable means transferable by delivery and the word instrument means a written document which creates a right in favour of some person. Thus, the term negotiable instrument means a written promise or order to pay money. Its ownership can be freely transferred by one person to another. (i) According to Black’s Law Dictionary A negotiable instrument is “A written and

More about Negotiable Instruments Act.

Open Document