Modes of Negotiation under Negotiable Instruments Act
Two methods can be used to carry out negotiations:
1. Delivery-based Negotiation (Section 47): A promissory note, bill of exchange, or cheque that is payable to a bearer may be delivered-based or negotiated. Example: B’s agent receives a negotiable instrument payable to the bearer from A, who is the holder, and wants to retain it for B. The tool has undergone negotiations.
2. Agreement by Endorsement and Delivery (Section 48): The only way to negotiate a promissory note, cheque, or bill of exchange payable to an order is by endorsement and delivery. The transferee does not become a holder unless the holder signs the instrument and delivers it. Each payee must approve it if there are several payees.
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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