Promissory Notes, Bill of Exchange and Cheque all are negotiable
instrument. The holder can claim payment on them subject to
conditions that the holder takes them: -
without notice of defect in the title of the transferor,
i.e. in good faith.
for consideration and
Example: If A steals a bill of exchange and
passes it on to B who is not aware of A's mode of acquiring the bill and who
takes it for the value and before the due date of the bill, B will be entitled
to get payment on the bill. Here B is a holder in due course.
A holder in
due course always gets a good title in case of forgery. Moreover whoever
gets the bill after the holder in due course will also get a good title to it;
it has been purged of all defects.
The instrument may be passed on
from one person to another by endorsement and delivery. The liability of the
endorser to subsequent parties is same as in the case of endorsement of cheque.
Thus, if a bill of exchange is dishonored, i.e. if payment is not made on the
due date by the promisor (drawee in case of bill of exchange), money can be
claimed from any of the previous endorsers, the payee and the maker of the
Demo Classes of Accounts (CA/CMA/CS/B.Com/11-12th) by CA/CMA Santosh Kumar Sir
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