Business Law UNIT 1

Nemo Dat Quod Non Habet -Section 27 of sales of goods act

When the seller himself is the owner of the goods, he conveys a good title in the goods when he sells it to
the buyer. Problem occurs when he is neither the owner nor has any authority to do this.
The maxim NEMO DAT QUOD NON HABET means no better title to the goods than the seller had. It
means that where the goods are sold by a person who is not the owner or has no authority to sell them, the
buyer acquires no better title than what the seller had. If the title of the seller is defective then the title of
the buyer is also defective and he cannot acquire a superior title to the seller.
EXCEPTIONS
The seller of the goods may not be having a good title yet the buyer gets a good title. The exceptions to the
same are as follows:-

1. Transfer of title by estoppel:- When the owner of the goods makes the buyer to believe that the
seller has the right to sell them, then the buyer gets a good title and the owner cannot recover the
goods from the buyer.
2. Sale by a mercantile agent:- It states that when a mercantile agent is in possession of the goods
with the consent of the owner then the sale made by him conveys a good title to the buyer
provided the buyer acts in good faith.

3. Sale by one of the joint owners:-when one of the owners, with the consent of the other coowners sells the goods then the sale made by him conveys a good title on the buyer.

4. Sale by a person under a voidable contract:-If the consent of the person to the contract has been
obtained through fraud, coercion etc then the contract is a voidable contract. If the person sells the
goods under a voidable contract and before the contract has been avoided then the buyer of such
goods gets a good title.

5. 5.

Sale by a seller in possession:- If the seller having sold the goods is still in possession of
the documents or the goods then the transfer of the goods or the documents of sale, or sale by a
mercantile agent on his behalf conveys a good title o the buyer.

6. Sale by the buyer in possession: - It states that if the buyer of the goods has obtained the
possession of the goods or the documents of title with the consent of the seller then the buyer gets
a good title provided that the seller has been acting in good faith.

7. Resale by an unpaid seller:- When an unpaid seller has exercised his right of lien and resells the
goods the buyer acquires a good title as against the original buyer.

8. Sale by finder of goods: - The finder of the goods acts as a bailee and he has to take care of the
goods till the time they are in his possession. When the finder of the goods sell the goods when
they are under the danger of perishing then the buyer of such goods gets a good title.

9. Sale by Pawnee: - As a general rule the Pawnee has to return the goods back when the debt
secured to him is paid back. If the pawnor does not discharge the debt he may further sell the
goods to any other person upon a reasonable notice to the pawnor. The buyer of such goods
acquires a good title to them.

Performance of a Contract
It is the duty of the seller to sell the goods and of the buyer to accept the goods and pay for them according
to the terms and conditions of the contract. It means that the seller has to deliver the goods of the kind, at a
time and place in the manner agreed upon and the buyer has t o accept the goods when they are delivered
properly.

Sellers Duty To sell The Goods

The duty of the seller is to sell the goods in accordance with the terms and conditions of the contract of
sale of goods .According to section 2(2) of the act there should be a voluntary transfer of possession of the
goods from one person to another.
The delivery of the goods can either be symbolic, actual or constructive delivery.

1. Actual Delivery:- When the goods are handed over by the seller to the buyer it is known as the
actual delivery of the goods. Ex:- the seller the books to the buyer or to his agent and the agent
takes the possession.
2. Symbolic Delivery:- When there is no actual transfer of the goods but only a symbol representing
that there is a transfer from one person to another .The goods may remain where they are but the
control may transfer. This is referred to as the symbolic delivery of goods. Ex:- the key of the
warehouse where the goods are kept.

3. 3.

Constructive delivery:- In this there is neither an actual delivery of goods nor the symbolic
delivery of goods but something is done which the parties treat as the delivery of goods. It is
referred to as the fictitious delivery or the delivery by allotment or acknowledgement.

Rules regarding Delivery

1. 1.

Delivery according to the contract:- The seller must deliver the goods according to the
terms of the contract. This may be w.r.t time, place and the manner of delivery.
2. 2. Buyers duty to apply for delivery:- It is the duty of the buyer to apply for the delivery of
the goods before the seller can be expected to deliver them. The buyer cannot blame the seller for
the non delivery of the goods unless he has made a demand and then the seller has failed to deliver
them. Therefore the buyer has to be ready and willing to pay the price in exchange of the goods.

3. 3.

Place of delivery:- The parties are free to decide the place of delivery of goods. The seller is
supposed to discharge the goods after paying the freight and other insurance charges. In case the
goods are future goods as they are yet to be produced then the place of delivery is the place where
they are manufactured.

4. 4.

Expenses of delivery:- Unless otherwise agreed upon the expenses of the sale of goods are
to be borne by the seller. If the buyer incurs such expenses he can later on claim the same from the
seller.

5. 5.

Effect of part delivery on the passing of property:- When only the part of the goods have
been transferred then the question arises tat whether the property only in the part of the goods
which have been transferred or that in the whole of the goods pass from the seller to the buyer.

6. 6.

Delivery of goods of wrong quantity or of different description:-It is the duty of the seller
to sell the goods of the same quantity and the same description as has been decided under the
contract.In VILAS UDHYOG LTD vs PRAG VANASPATI PRODUCTS The plaintiff agreed to
transfer 120 barrels of groundnut oil but instead transferred 140 barrels, the defendant refused to
take the delivery and pay for the same as they were in the excess of contract quantity. The buyer
not only refused to take the delivery but also repudiated the contract.

7. 7.

Delivery to carrier:- The delivery of the goods to the carrier is prima facie deemed to be the
delivery of the goods to the buyer. The delivery of the goods to the carrier or some other bailee for
the purpose of transmission to the buyer may pass the property in the goods to the buyer.

8. 8.

Risk where goods are delivered at a distant place:- Where the seller undertakes to deliver
the goods at his own risk at a place other than where they are at the time of the contract. He shall
not be liable for the loss to the goods which is necessarily incident to the course of transit.

DUTY OF THE BUYER

1. Duty to accept the goods:- The buyer is bound to accept the goods if they are properly delivered.
He is not bound to accept the goods if they are more or less in quantity than what was decided in
the contract. He is not bound to take the delivery of the goods by installments.
2. Duty to pay the price:- It is the duty of the buyer to pay the price in accordance with the terms
and conditions of the contract. If the buyer does not pay the price after it has become due then the
seller may sue hi, for the same.

UNIT II

UNPAID SELLER:In simple words, "Unpaid seller" means a person who has sold the goods for a price but price has not been
paid to him.
According to Sec 45, the seller of the goods is deemed to be an unpaid seller:
(i)

When the whole of the price has not paid or tendered

(ii)
When a bill of exchange or other negotiable instrument has been received as a condition
payment and the condition on which it has been received remains unfulfilled by reason of dishonor of the
instrument or otherwise.
RIGHTS OF AN UNPAID SELLER
An unpaid seller has two-fold rights, namely:
1. Rights against goods; and
2. Rights against the buyer personally.

1. 1.

Rights of unpaid seller against goods:

1.1 Rights of lien

1.2 Right of stoppage of goods in transit
1.3 Right of rescale

1. 2.

Rights of unpaid seller against buyer personally:

2.1 Suit for price.

2.2 Suit for damages for non-acceptance.
2.3 Suit for special damages and interest

1. 1.

Rights of unpaid seller against goods:

1.1 Rights of lien

The right of lien means lawfully right to retain the goods possession until the full price is received. An
unpaid seller can exercise his right of lien in following cases. Sec 47-49
1. Where the goods have been sold on the cash basis.
2. Where the goods have been sold on credit basis and the term of credit has expired.
3. Where the buyer has become insolvent even if the period of credit has not been expired.

Other rules to satisfy the conditions for this right are

1. The unpaid seller must be in actual possession of the goods sold.

2. It can be exercised even If the documents of title have been delivered to the buyer.
3. It can be exercised for the price and not for other expenses.
4. If the seller delivers some goods, it can be exercised on the remaining.

Termination of right of lien

Sellers right of lien is terminated in following cases.
1. When he delivers the goods to the carrier or other bailey for transmission to the buyer.
2. When the buyer or his agent lawfully obtains the possession of the goods.
3. When seller waives his right of lien on the goods
4. The right of lien once lost will not be restored.
5. When the buyer further sells the goods and the seller agrees

Example: A seller S sells a TV set to B and delivers it to B and since the TV set was not functioning
properly, B delivered it back to S for the repairs. It was held that S can not exercise his right of lien
over TV set.

1.2 Right of stoppage of goods in transit:It means stoppage of goods while they are in transit to take possession until the price is paid (Sec. 50-52)
Unpaid seller can stop the goods in transit in the following cases:

1. While the buyer becomes insolvent.

2. While the goods are out of actual possession of seller, but have not reached buyers possession i.e.
goods are in transit with career.

3. The unpaid seller can stop the goods in transit only for payment of the price of the goods and not
for any other charges.

Example:- "X" sells 100 bales of cotton to "Y" but delivery will be two stages. "X" delivers 50 bales first.
Later on he comes know that "Y" has become insolvent. "X" can stop delivery of bales in transit.
1.3 Right of Resale:If a buyer fails to pay or offer the price within a reasonable time, the unpaid seller has the right to resell the
goods in the following circumstances.
a)

Where the goods are of perishable nature.

b)
Where the unpaid seller has exercised his right of lien or stoppage in transit and gives a notice to
buyer of his intension of resell the goods.
c)

Where the unpaid seller has expressly reserved his right of resale.

d) Where seller gives notice to the buyer of his intension to resell and the buyer does not pay within a
reasonable time, he can
1. Recover loss on resale of the goods, if any
2. Retain any surplus on resale of goods, if any

However if the seller sells with out the notice to the buyer, he can not
1. Recover any loss of the goods, if any
2. Retain any surplus on the resale of the goods, if any

Example:M sells 100 blankets to N and gives him one week for payment. N does not pay. M can
resell those to any other person

1. 2.

Rights of unpaid seller against buyer personally:

2.1 Suit for Price (Sec 55):- If the goods have passed to the buyer and buyer refuse to pay the price, the
seller can sue for price.

2.2 Suit for Damages for Non Acceptance (Sec 56): - If buyer refuses to accept and pay for the goods,
the seller has the right to sue him for damages non-acceptance. He can recover only damages and not full
price.

2.3 Suit For Special Damages & Interest (Sec 61):- The unpaid seller can recover the reasonable interest
on the unpaid price goods sold. The seller can also sue the buyer for special damages where both the
parties are aware of such loss at the time of contract.

UNIT III:-NEGOTIABLE INSTRUMENTS

Negotiable instrument is a piece of paper which enables its holder to claim something usually money but
sometimes goods. A negotiable instrument includes a promissory note, A bill of exchange etc.

A bill of exchange has 2 qualities:1. The right of ownership contained in the instrument is transferred from one person to another by
delivery or sometimes endorsement.
2. The transferee who takes the same gets a good title even though the title of the transferor is
defective.

PROMISSORY NOTE- SECTION 4

A promissory note is an instrument in writing containing an unconditional undertaking signed by the maker
to pay a certain sum to the holder of the instrument.
It contains the following essentials:-

1. It must be in writing and signed by the maker.

2. There must be a promise to pay.
3. Such promise must be unconditional.
4. The promise must be with respect to payment of money.

5. The amount payable must be certain.

6. The payee must be certain.

BILL OF EXCHANGE SECTION 5

1. In a bill of exchange one person makes an order to another to pay a certain sum of money to
someone. In a bill of exchange an order is made to another to pay the respective amount due on
the bill of exchange.
2. There are three parties in a bill of exchange:- The drawer, drawee and the payee.
3. The person who draws the bill of exchange is called the drawer, the person on whom the bill of
exchange is drawn is called the drawee and the person to whom it is payable is called the payee.
4. After the drawee has accepted the bill of exchange he is called the acceptor
5. If the drawee does not honor the order given to him, the person entitled to receive the payment
approaches the drawer. In such a case if the first drawee does not honor the bill of exchange then
the second drawee can be approached and he is known as the drawee in case of need

WHO CAN ACCEPT

1. The drawee of bill of exchange that is the person on whom it has been drawn.
2. When it has been drawn on more than 1 drawee then any one of the several drawee can accept.
3. A person who is mentioned in the bill of exchange.
4. An acceptor for honour.

HOLDER, HOLDER IN DUE COURSE AND PAYMENT IN DUE COURSE

HOLDER (SECTION-8)
Holder means the owner of the negotiable instrument. In order to be a holder he must satisfy the following
conditions:1. He should have the possession of the instrument.
2. He should have the right to recover the amount due from the Parties.
When a negotiable instrument is originally made the payee is the holder of the same. If the payee transfers
his right to another person then the transferee becomes the holder in place of the payee

HOLDER IN DUE COURSE (SECTION-9)

A holder in due course is always a privileged person and generally has a good title even though the title of
the transferor is defective. When a person receives a negotiable instrument as a holder in due course he is
capable of receiving a better title than the transferor. Ex:- If a person receives a negotiable instrument by
theft the title of the person having the same will be defective. But if he transfers it to a holder in due course
the title of the holder in due course will be good.

A person can be called a holder in due course

If the following conditions are satisfied:1. He is the holder of the negotiable instrument.
2. He has obtained it for a consideration.
3. He has obtained it before the maturity of the instrument.
4. He has obtained the negotiable instrument in good faith.

PAYMENT IN DUE COURSE(SECTION 10)

1. It should be in accordance with the tenor of the negotiable instrument:- It should be according to
whatever is written on the instrument.
2. It should be in good faith:- The person should be acting in good faith and honest belief that a
proper payment is made to a genuine person.
3. It should be without negligence:- If on a travelers cheque the signature of the person receiving the
payment are different from the ones put by the holder at the time of their issue, and the bank
officer does not bother to check the signatures and makes the payment, there is a negligence and
hence the payment is out of due course.
4. It should be given to a person whose title does not appear to be defective.

DISTINCTION BETWEEN A BILL OF EXCHANGE AND A PROMISSORY NOTE.

Promissory note
1. In this there are 2 parties the maker and the
payee.
2. There is promise to make the payment.
3. Here there is a debtor and a creditor
relationship.
4. The liability of the maker of the promissory
note is primary.
5. A promissory note cannot be made payable to
the maker himself.

Bill of exchange
1. In this there are three parties the maker, drawee,
payee.
2. There is an order to make the payment.
3. Here the drawer is generally the creditor of the
drawee on whom the bill of exchange is drawn.
4. Here the liability of the acceptor is a primary
liability whereas the liability of the drawer
arises if the acceptor does not honor the bill of
exchange.
5. Bill of exchange the drawer may order the
payment to be made to himself also.

CHEQUE- SECTION 6

A cheque is a bill of exchange drawn on a specified banker, it includes an electronic image of truncated
cheque.

FEATURES OF A CHEQUE

1. It is always drawn on some bank and the drawee is always the bank.
2. It is always payable on demand. A bill of exchange other than a cheque may be either or not
payable on demand.

DISTINCTION BETWEEN A CHEQUE AND A BILL OF EXCHANGE.

1. In a cheque the drawee is always a bank and in case of a bill of exchange it is a person.
2. A cheque is always payable on demand but a bill of exchange may or may not be payable on
demand.
3. In a cheque there is no system of acceptance but in a bill of exchange there is always a system of
acceptance.
4. In case of a cheque as it is always payable on demand no grace days are allowed but in a bill of
exchange as it is not payable on demand three days grace period is allowed.

NEGOTIATION OF NEGOTIABLE INSTRUMENTS

When the holder of the negotiable instrument i.e the person who is entitled to receive the payment transfers
the negotiable instrument to another person so that the transferee is now entitled to the payment, the
instrument is said to have been negotiated.
Negotiation further means that the transfer of the negotiable instrument form one person to another in
accordance with the provisions of the negotiable instrument act. The transfer should have been made with
the intention to transfer the rights. For ex:- if I deliver a cheque to my servant for a safe custody he will
not be entitled to receive the payment as he cannot be called the holder of the cheque. But if the cheque is
delivered to the servant for his services the servant will become the holder of the cheque.

DIFFERENCE BETWEEN NEGOTIATION AND ASSIGNMENT

1. Negotiation can be made by delivery whereas assignment has to be made by a written document
signed by the transferor.
2. When a negotiable instrument is negotiated it is presumed that it has been done for a
consideration, whereas in case of assignment there is no such presumption and the burden of proof
lies on the transferee.
3. No notice is to be given in case of negotiation but a notice has to be given to the person who has to
make a payment in case of assignment.
4. Indorsement in a negotiable instrument does not require any stamp but an assignment requires a
payment of stamp duty.

KINDS OF INDORSEMENT

1. GENERAL INDORSEMENT:- The indorser does not indicate as t who is the indorsee but his
signatures indicate that he wants to transfer his rights to someone.

2. SPECIAL INDORSEMENT:- When the indorser in his indorsement mentions as to whom the
amount is to be paid, the indorsement is said to be the indorsment in full or special indorsement.

3. RESTRICITIVE INDORSEMENT:- An indorsement is restrictive when the indorses while

making the indorsement restricts the right of the indorsee to further transfer the negotiable
instrument.

4. SANS RECOURSE INDORSEMENT:- When a person makes an indorsement the indorsee gets
a right to have the payment who are liable to pay the same. And if he is unable to receive the same
he can bring an action against the indorser Sometimes when the indorser excludes his liability on
the instrument this is referred to as the sans recourse indorsement.

HOLDER, HOLDER IN DUE COURSE AND PAYMENT IN DUE COURSE

Holder means the owner of the negotiable instrument. In order to be a holder the following conditions
should be satisfied:1. He should be entitled to the possession of the negotiable instrument.
2. He should have the right to receive the payment due on the parties.

When a negotiable instrument is originally made, the payee is the holder of the same. If the payee transfers
his right to another person then the transferee becomes the holder in place of the payee. In case of bearer
instrument the person to whom it is transferred , the transferee is called the bearer . The persons who are
entitled to become the holder are as follows:1. The payee
2. The bearer( The transferee of the bearer instrument)
3. The indorsee( The transferee of the order instrument)

HOLDER IN DUE COURSE (SECTION-9)

A holder in due course is a person who generally has a good title even though the title of the transferor may
be a defective one. EX:- if a person obtains a negotiable instrument by means of theft, fraud etc the title of
the person having the possession of the same may be a defective one but if he transfers it to someone (who
is a holder in due course)he may have a good title for the same.
In order to be a holder in due course the following conditions should be satisfied:1. He should be the holder of the negotiable instrument.
2. He should have obtained it for a consideration.
3. He should have obtained it before the maturity of the instrument.
4. He should have obtained it in good faith.

PAYMENT IN DUE COURSE

Generally a person making a payment in due course is discharged by making such payment i.e even if the
payment is made to a wrong person but it is otherwise in due course the person making the payment cannot
be held liable for the same.

In order that the payment is in due course the following conditions should be satisfied:-

1. It should be in accordance with the tenor of the negotiable instrument:- The payment should
be made according to whatever is written on the instrument.

2. It should be in good faith:- It means that it should be made under such circumstances that the
person to whom the payment has been made has a reason to believe that there is nothing wrong
with such payment.

3. It should be without negligence: - If on the travelers cheque the signatures of the person
receiving the payment are different from the ones put by the holder at the time of their issue and
the bank officer does not bother to compare the two signatures and makes the payment, there is a
negligence.

4. It should be made to a person in possession whose title is not defective.

DISHCHARE FROM LIABILITIES ON NOTES, BILLS AND CHEQUES.

When a party who is liable on a negotiable instrument ceases to be liable he is said to have been discharged
from the liability.

MODES OF DISCHARGE:

1. 1. BY PAYMENT: - It is the most common mode of discharge. Since a negotiable instrument

is ultimately meant for payment, payment of the amount due on the instrument to the holder.

1. 2. BY CANCELLATION:- When the name of the negotiable instrument cancels the name of
the party to a negotiable instrument with an intent to discharge him from liability, such party
whose name has so been cancelled are discharged from the liability to the holder who had thus
cancelled the name.

1. 3. BY RELEASE:- The discharge of parties liable on the negotiable instrument may also be
affected by a release.

1. 4. BY NON PAYMENT FOR ACCEPTANCE OF THE BILL OF EXCHANGE:- The act

states that when a bill of exchange is payable after sight its holder must present it for acceptance to
the drawee within a reasonable time after it is drawn. If he makes a default in making such
presentment the drawer and all indorsers who were liable towards such a holder are discharged
from their liability towards him.

1. 5.

BY THE HOLDER ALLOWING THE DRAWEE OF THE BILL MORE THAN 48

HOURS TO ACCEPT:- When the holder presents the bil of exchange for acceptance the drawee
is entitled to be allowed a period of 48 hours to consider whether he will accept the bill or not.
After the expiry of the period of 48 hours he holder is bound to demand back the delivery of the
bill whether the same has been accepted or not.

1. 6.

BY THE HOLDER AGREEING TO A QUALIFIED OR LIMITED ACCEPTANCE

OF THE BILL OF EXCHANGE:- If the holder of the bill of exchange who presents the same
for acceptance, acquiesces in a qualified acceptance of the bill then the person who has to make
the payment is discharged as against the holder.

1. 7.

BY MATERIAL RELEASE:- If the holder of the instrument makes a material alteration

he looses his right of action as against those parties who would otherwisw be liable towards him.
If however the prior parties themselves consent to the alteration their liability on such instrument
is not affected by such alteration. By material alteration the identity of the original instrument is
destroyed and those parties who had agreed to be liable are no more liable on the altered
instrument.

1. 8.

BY THE DRAWEE BANK MAKING THE PAYMENT IN DUE COURSE:- There are
two cases when the drawee bank makes the payment to a wrong person but otherwise in due
course, the bank is discharged and it can debit the customers account with such payment. The two
cases are as follows:2. When in an prder cheque the payees payment is forged.

3. When the payment of the bearer cheque is made to the bearer. Ignoring the indorsement at the
back of the chque.

1. 9.

BY THE DRAWEE NOT DULY PRESENTING A CHEQUE FOR PAYMENT:-The

holder of the chque has a duty to present the cheque for payment within a reasonable time of its
issue. If the holder makes a delay in presenting the cheque and in the meanwhile the bank fails
causing damage to the drawer , the drawer is discharged to the extent of actual damage caused to
him due to the delay in the presentment of the cheque.

CROSSING OF CHEQUES

Open And Uncrossed Cheques

An uncrossed cheque is called an open chque and its payment is made at the counter at the time of
presentation of the cheque.
In this case if a wrong person takes away the payment of such cheque it is difficult to trace him. Moreover
if the cheque is transferred to a wrong person and then from him to a person who is the holder in due
course, the holder in due course will get a good title. This difficulty can be removed by the crossing of the
cheques.
The payment of the crossed cheques is not to be made at the counter but the person who wants to get the
payment has to get the same through the bank. Crossing of cheques is an instruction to the drawee i.e the
paying bank that the payment is not to bne made at the counter but through the bank. If the person takes
the payment through the bank it is possible to trace the person who has taken the payment from the
crossed cheque.

CROSSING AND MODES OF CROSSING

GENERAL CROSSING:Where a cheque bears across its face an addition of words and co or any other abb between two
tranverse lines, that addition shall be deemed to be a crossing, It means that the drawee bank is not to make
the payment of the cheque at the counter but the payment is to be made only to another bank who collects
the chque on behalf of the holder.
SPECIAL CROSSING:Where a chque bears across its face an addition, the name of the banker either with or without the words
not negotiable that cheque is deemed to be a crossing and the cheque is deemed to cross specially and to
be crossed to that banker.
ONLY ONE SPECIAL CROSSING:Special crossing can only be made in the name of one banker. Where a cheque is crossed specially to more
than one banker the banker on whom it is drawn shall refuse payment thereof. One exception to the same is
that if a cheque is specially crossed and it may make than the latter may collect as an agent for the former
bank.

NOT NEGOTIABLE CROSSING

After the words not negotiable are added a holder in due course will not be able to have a better title than
that of the transferor. Ordinarily in a negotiable instrument if the title of the transferor is bad, the
transferee if he is the holder in due course. Will have a good title and will also be able to convey a good
title.

PRESENTMENT OF NEGOTIABLE INSTRUMENT

There are three kinds of presentment:1. Presentment of a bill of exchange for acceptance.
2. Presentment of a promisorry note for sight.
3. Presentment of a bill of exchange, promissory note or a cheque for payment.

PRESENTMENT FOR ACCEPTANCE (SECTION- 61)

Only a bill of exchange is to be presented for acceptance. Every bill of exchange is not required to be
presented for acceptance. A bill of exchange payable on demand or on a certain day or a certain period
after date need not be accepted and it becomes due for payment even otherwise. When a bill of exchange is
expressed to be payable after sight it means that its payment is to be made only after acceptance. Thus if
A draws a bill of exchange on B on 1st January ordering him to pay two months after sight its payment
will become due only after the lapse of the period of two months from the date it is accepted by B. If B
does not accept the bill its payment will never become due.

PRESENTMENT TO WHOME:-

1. Generally it is the drawee to whome the presentment is to be made for acceptance.

2. Where there are several drawees all of them are required to accept. But if some of the drawees
have the authority to accept or where the drawees are patners, then the presentment can be made to
any such person having authority.
3. If the drawee is dead, the presentment may be made to his leagal representative. The legal
representative would be personally liable by such an acceptance.
4. If the drawee becomes insolvent, the presentment should be made to his assignee.

PRESENTMENT BY WHOM:-

The presentment is to be made by the holder of the bill of exchange. A bill of exchange may even be
negotiated before the acceptance has been obtained.

TIME AND PLACE OF PRESENTMENT

If any time or place for presentment is specified in a bill of exchange it must be presented for acceptance
accordingly. Where no time and place has been mentioned in the bill it must be presented within a
reasonable time after it has been drawn and in business hours in a business day. If the drawee had no place
for business of fixed residence then such presentment is to be made to him in person wherever he can be
found. Where no time has benn mentioned for presentment has been specified, a bill must be presented
within a reasonable time after it has been drawn.

HOLDERS DUTIES ON PRESENTMENT

The holder must, if so required by the drawee of the bill of exchange presented to him for acceptance,
allow the drawee 48 hours to consider whether he will accept it or not. On the expiry of the period of 48
hrs the holder must demand back the bill whether accepted or not.

Another duty of the holder is to obtain only qualified and unconditional acceptance of the bill of exchange.
If the drawee makes a qualified acceptance the holder should consider the bill as having been dishonoured.
The holders duties on presentment are:1. To present the bill of exchange for acceptance within the time specified in the bill, and if no time
is specified within a reasonable time after it has been drawn.
2. To present the bill at the place what has been mentioned in the bill and if no place then at the place
of his residence.
3. To allow the drawee 48 hours and not more.
4. To obtain an unqualified acceptance of the bill.

PRESENTMENT OF A PROMISSORY NOTE FOR SIGHT(SECTION-62)

Sometimes a promissory note may be made payable at the certain time after sight. Such a promissory note
must be presented to the maker for sight thereof for sight by the person entitled to demand such payment
within a reasonable time after it is made. In default of such presentment the party is liable to the person
making such default.

PRESENTMENT FOR PAYMENT (SECTION 64)

All promissory notes, bills of exchange and cheques are presented for payment when the payment becomes
due. The presumption is that the payment is to be made at the debtors place. The maker of the promissory
note or the acceptor of the bill of exchange being principal debtor could be charged with liability even
without presentment for payment.

PRESENTMENT BY WHOM
The presentment for the payment of the promissory note, bill of exchange etc is made to the maker,
acceptor or the drawee of the instrument. Or if in case the acceptor is not alive then in such a case the legal
representative would accept the bill of exchange.
TIME OF PRESENTMENT
A promissory note or bill of exchange made payable at specified period after date of sight thereof must be
presented for payment at maturity. Every promissory note or bill of exchange which is not expressed to be
payable on demand, at sight or on presentment is at maturity on the third day after the day on which it is
expressed to be payable. A promissory note payable by installment must be presented for payment on the
third day after the date fixed for payment of each installment.

When presentment for payment unnecessary.

1. If the maker, drawee or acceptor intentionally prevents the presentment of the instrument. It means
that the person to whom the presentment is to be made actively does something so as to prevent
the presentment of the instrument.
2. When the person to whom the presentment is to be made closes the place of business where the
presentment is to be made or if he cannot be found at the usual place of business during the time
the payment is to be made.
3. If after the maturity of the negotiable instrument the person entitled to presentment impliedly
waives the presentment the presentment is excused.
4.

Where the drawer is not likely to suffer damages from the want of presentment for payment the
presentment is excused as against the drawer.

NOTING AND PROTESTING

When a negotiable instrument is dishonored the holder may sue his prior parties i.e the drawer and the
indorsers after he has given a notice of dishonor to them. The holder may need an authentic evidence of the

fact that a negotiable instrument has been dishonored. When a cheque is dishonored general1y the bank
who refuses payment returns back the cheque giving reasons in writing for the dishonor of the cheque.
Sections 99 and l00 provide convenient methods of
authenticating the fact of dishonor of a bill of exchange and a promissory note by means of noting and
protest.

NOTING

As soon as a bill of exchange or a promissory note is dishonored, the holder can after giving the parties due
notice of dishonor, sue the parties liable thereon. Section 99 provides a mode of authenticating the fact of
the bill having been dishonored. Such mode is by noting the instrument. Noting is a minute recorded by
a notary public on the dishonored instrument or on a paper attached to such instrument. When a bill is to be
noted, the bill is taken to a notary public who represents it for acceptance or payment as the case may be
and if the drawee or acceptor still refuses to accept or pay the bill, the bill is noted as stated above.

Noting should specify in the instrument, (a) the fact of dishonor, (b) the date of dishonor, (c) the reason for
such dishonor, if any (d) the notarys charges, (e) a reference to the notarys register and (f) the notarys
initials.

Noting should be made by the notary within a reasonable time after dishonor. Noting and protesting is not
compulsory but foreign bills must be protested for dishonor when such protest is required by the law of the
place where they are drawn. Cheques do not require noting and protesting. Noting by itself has no legal
effect. Still it has some advantages. If noting is done within a reasonable time protest may be drawn later
on. Noting without protest is sufficient to allow a bill to be accepted for honor.

PROTEST

Protest is a formal certificate of the notary public attesting the dishonour of the bill by non-acceptance or
by non-payment. After noting, the next step for notary is to draw a certificate of protest, which is a formal
declaration on the bill or a copy thereof. The chief advantage of
protest is that the court on proof of the protest shall presume the fact of dishonour.

Besides the protest for non-acceptance and for non-payment the holder may protest the bill for better
security. When the acceptor of a bill becomes insolvent or suspends payment before the date of maturity, or
47 when he absconds the holder may protest it in order to obtain better security for the amount due. For
this purpose the holder may employ a notary public to make the demand on the acceptor and if refused,

protest may be made. Notice of protest may be given to prior parties. When promissory notes and bills of
exchange are required to be protested, notice of protest must be given instead of notice of dishonour. (Sec.
102)

Inland bills may or may not be protested. But foreign bills must be protested for dishonour when such
protest is required by the law of the place where they are drawn (Sec. 104). Where a bill is required to be
protested under the Act within a specified time, it is sufficient if it is noted for protest within such time.
The formal protest may be given at anytime after the noting (Sec. 104A)

Contents of protest

Section 101 of the Act lays down the contents of a regular and perfect protest which are as follows:

1. 1.

The instrument itself or a literal transcript of the instrument; and of everything written or
printed thereupon.
2. 2. The name of the person for whom and against whom the instrument has been protested.

3. 3.

The fact of and reasons for dishonour i.e. a statement that payment or acceptance or better
security, as the case may be, has been demanded of such person by the notary public from the
person concerned and he refused to give it or did not answer or that he could not be found.

4. 4.

The time and place of demand and dishonour.

5. 5.

The signature of the notary public.

6. 6.

In the case of acceptance for honour or payment for honour the person by whom or for
whom such acceptance or payment was offered and effected.

DISHONOUR OF CHEQUE (SECTION 138)

Dishonouring of a Cheque u/s 138 A cheque is a type of bill of exchange and is a negotiable instrument. It
is used for making payments without any need to carry cash. A Dishonoured Cheque is a Cheque that is not

credited by the Bank for numerous reasons including: The signature does not match; the account on which
the cheque is drawn has insufficient funds, the date is invalid i.e. the presentation of the cheque 6 months
from the date on the cheque.

The dishonouring of a cheque u/s 138 is considered a criminal offence, if anyone draws a cheque on an
account, maintained by him with a banker, to pay someone else money and the cheque bounces, that
person is guilty of having committed an offence under the Section 138, if the following conditions are
involved:

The cheque should have been drawn to discharge a legally-enforceable debt or other liability, either
wholly or partially.
The cheque should have bounced because the amount of money standing to the credit of that account is
insufficient to honour the cheque or because it exceeds the amount arranged to be paid from that account
by an agreement made with that bank. However, if, for example, a cheque bounces because the signature
on the cheque does not match one in the Banks records, Section 138 is not applicable.
The cheque should have been presented within period of six months or within period of its validity,
whichever is earlier.
The payee or the holder in due course should have issued a notice in writing to the drawer within thirty
days of the receipt of information by him from the bank regarding the return of cheque as unpaid.
After the receipt of the said notice by the payee or the holder in due course, the drawer should have failed
to pay the cheque amount with in fifteen days of the receipt of the said notice.
On non-payment of the amount due on a dishonoured cheque within fifteen days of the receipt of notice
by the drawer, the complaint should have been filed within one month from the date of expiry with the
grace time of fifteen days, before a Metropolitan Magistrate or someone not below the rank of a Judicial
Magistrate, First Class. The cognizance of a complaint may be taken by the court after the prescribed
period, if the complaint satisfies the court that he had sufficient case for not making a complaint within the
specified period.
The Offence under this Act is compoundable (A compoundable offence is one which can be settled
privately).