Duration of Negotiability
As stated under Section 60 of Negotiable Instrument Act 1881, A negotiable instrument may be discussed until it is paid or satisfied by the maker, drawee, or acceptor at or after maturity, but not after such payment or satisfaction (unless the maker, drawee, or acceptor does so after maturity). A negotiable document, such as a promissory note or check, can be transferred to several parties as needed; this process is known as “negotiation.” That being said, the instrument cannot be transferred beyond its maturity date by the creator, the drawee, or the acceptor, who are the parties that agree to pay. Furthermore, the instrument cannot be transferred once payment has been received or the maker, drawee, or acceptor has satisfied their duty when or after it is due.
For example: Jiya has a cheque that he received from Riya, which is due to mature on April 30th. Jiya can endorse or transfer this cheque to someone else, say his friend Minakshi, any time before the cheque’s maturity date, as long as Jiya is not the maker, drawee, or acceptor of the cheque. If Jiya endorses the cheque to Minakshi on April 29th, Minakshi can further negotiate it. However, once Riya, the drawee, pays the amount on the cheque or it is otherwise satisfied on or after April 30th, the cheque cannot be negotiated further. So if Jiya still has the cheque on May 1st and it has been paid by Riya, he cannot transfer it to Minakshi anymore because it has lost its negotiable character post maturity and payment.
Negotiation of Negotiable Instruments: Definition, Meaning and Modes
A pillar of commercial law, the Negotiable Instruments Act (NI Act) established a robust legal framework for the regulation of a wide range of financial instruments vital to commerce and industry. The intricacy of negotiable instruments is resolved by the NI Act, which was enacted into law in India in 1881 and offers consistency and clarity in their transfer, use, and enforcement. The NI Act promotes transparency and equity in business dealings by outlining the rights, responsibilities, and duties of parties engaging in negotiable instruments. Its rules regulate the creation, bargaining, and implementation of these instruments, ensuring adherence to the law and promoting confidence in the financial system.
Geeky Takeaways:
- A negotiated instrument is a written agreement that guarantees a certain payment to the instrument’s specified holder.
- A legal foundation for several types of negotiable instruments was established by the Negotiable Instruments Act 1881.
- The procedure by which a third party is made the holder of the instrument to be entitled to its ownership and the payment owed on it in his name is known as negotiation.
- Making the transferee of a promissory note, bill of exchange, or check the holder thereof is the fundamental goal of negotiation.
Table of Content
- Negotiation of Negotiable Instruments
- Who can Negotiate under Negotiable Instruments Act?
- Duration of Negotiability
- Negotiation and Assignment Distinguished
- Modes of Negotiation under Negotiable Instruments Act
- Conclusion
- Negotiation of Negotiable Instrument- FAQs
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