- An instrument payable to a fictitious person is treated as a bearer instrument because a fictitious person is incapable of indorsing and has no right to the instrument because the person never existed and the maker or drawer has knowledge thereof. 10.
Who is primary liable to promissory note?
As per section 32 of negotiable instrument act, in the absence of a contract to the contrary, the maker of a promissory note and the acceptor before the maturity of a bill of exchange are under the liability to pay the amount thereof at maturity.
What is the effect of non delivery of a negotiable instrument?
Incomplete instrument not delivered. - Where an incomplete instrument has not been delivered, it will not, if completed and negotiated without authority, be a valid contract in the hands of any holder, as against any person whose signature was placed thereon before delivery.
Who pays a promissory note?
A promissory note, sometimes referred to as a note payable, is a legal instrument (more particularly, a financing instrument and a debt instrument), in which one party (the maker or issuer) promises in writing to pay a determinate sum of money to the other (the payee), either at a fixed or determinable future time or ...
Who prepares a promissory note?
Two parties involved in a promissory note: . The Maker or Drawer – the person who prepares the note and promises to pay the amount mentioned therein.
What is the importance of negotiable instrument?
Negotiable instruments are critical to our economy because they allow you to do business and to be certain youll receive money for services or goods without actually transferring any cash. For example, a business can mail a check for payment rather than sending a large amount of money.
What is the main purpose of negotiable instruments?
The purpose of a negotiable instrument is to transfer funds from one entity to the other. The term negotiable refers to the fact that the note can be assigned to another party. Once transferred, no additional demands or stipulations are made on the bearer of the document.
What are the stages of the life of a negotiable instrument?
The following are 11 stages in the life of a negotiable instrument:Preparation and signing.Issue.Negotiation.Presentment for acceptance, in certain kinds of bills of exchange.Acceptance.Dishonor by non-acceptance.Presentment for payment.Dishonor by non-payment.
What is a presentment for payment?
(a) Presentment means a demand made by or on behalf of a person entitled to enforce an instrument (i) to pay the instrument made to the drawee or a party obliged to pay the instrument or, in the case of a note or accepted draft payable at a bank, to the bank, or (ii) to accept a draft made to the drawee.
What is a fictitious bill?
—An acceptor of a bill of exchange drawn in a fictitious name and payable to the drawers order is not, by reason that such name is fictitious, relieved from liability to any holder in due course claiming under an indorsement by the same hand as the drawers signature, and purporting to be made by the drawer.
What is an inchoate instrument?
Inchoate Instrument means an incomplete instrument. The drawer/ maker/ acceptor/ endorser of a negotiable instrument may sign and deliver the instrument to another person in his such capacity leaving the instrument, either wholly blank or having written on it the word incomplete.
What happens if a promissory note is not paid?
What Happens When a Promissory Note Is Not Paid? Promissory notes are legally binding documents. Someone who fails to repay a loan detailed in a promissory note can lose an asset that secures the loan, such as a home, or face other actions.