Presentment for payment
Business Low Notes :-
The negotiable instrument must be presented for payment. The rule regarding presentment for payment are as follows :
- Promissory notes, bills of exchange and cheques must be presented for payment to the maker, acceptor or drawee thereof respectively, by or on behalf of the holder. If default in presentment is made no party other than the maker, acceptor or drawee will be liable to the
- A pronote, payable at a certain period after sight, must be presented to the maker by a person who is entitled to demand payment, within a reasonable time after it is made and during business hours on a business If presentment is not made, no party there to is liable on it to the person failing to present.
- Where a pronote is payable on demand and is not payable at a specified place, no presentment is
- A pronote or bill made payable at a specified period after date or sight, must be presented for payment at
- A note or bill made, drawn or accepted payable at a specified place must be presented for payment at that place otherwise the maker or the drawer will be liable on
- A note, bill or cheque made, accepted or drawn payable at “Specified place and not elsewhere” must be presented at that place, otherwise no party to it will be
- A pronate payable by instalments must be presented for payment on the third day after the date fixed for each
- A note or bill not made payable at a specified place must be presented for payment at the place of business, if any or at the usual residence, of the maker, drawee or acceptor thereof, as the case may.
- A cheque must be presented at the bank upon which it is drawn before the relation between the drawer and his banker has been altered to the prejudice of the If default is made the drawer be discharged from liability.
- If the cheque is not presented to the banker for payment within a reasonable time, then all parties other than the drawer will be
Delay in presentment for acceptance or payment is excused, if it is caused by circumstances beyond the control of the holder.
Presentment for payment not necessary: Presentment for payment is not necessary in the following cases. In all such cases the instrument is deemed to be dishonoured at the due date so presentment for payment is not necessary:
- If the maker, drawee or acceptor intentionally prevent presentment of the
- If the instrument being payable at his place of business, he closes such place on a business day during the usual business
- If the instrument being payable at some other specified place, neither he nor any other person authorised to pay it attends at such place during the usual business
- If the instrument is not payable at & specified place and the drawer or acceptor, cannot, after due search, be
- Where there is no promise to pay notwithstanding non-presentment.
- Where the presentment is waived by the party entitled to presentment becomes impossible because of impossibility or illegality or
- Where the drawer could not possibly have suffered any damage by non-presentment.
- Where the drawee is a fictitious person, or one incompetent to
- Where the bill has been dishonoured by non-acceptance.
- Where the terms of agreement do not require any presentment for the
In all the above cases no presentment for payment is necessary and^he instrument is deemed to be dishonoured at the due date.
A bill of exchange may be dishonoured either by non-acceptance or by non-payment. A pronote or cheque is dishonoured by non-payment as acceptance is not required in their case.
When an instrument is dishonoured the holder must give ,notice of dishonour to the drawer or maker or his previous holders if he wants to make them liable.
Dishonour of a bill by non-acceptance (Sec.91) : A bill is said to be dishonoured’by not acceptance when :
- the drawee does not accept it within 48 hours from the time of presentment for acceptance;
- presentment for acceptance as excused and the bill remains unaccepted;
- the drawee is incompetent to contract;
- the drawee is a fictitious person;
- the drawee, after a reasonable search, cannot be found; and
- the acceptance is qualified and the holder opts to treat it as
Dishonour of an instrument by non-payment (Sec. 92) : A promissory note, a bill of exchange or cheque IS said to be dishonoured by non-payment when the maker of the note, acceptor of the bill or drawee banker of the cheque makes default in payment on being duly required to pay the same.
A negotiable instrument is also deemed to be dishonoured by non-payment when presentment for payment is excused and the instrument remains unpaid on maturity; and instrument when overdue, remains unpaid.
Effect of Dishonour : The drawer and all the endorsers of the bill are liable to the holder if the bill is dishonoured either by the non-acceptance or by the non-payments provided the he gives them notice of dishonour. The drawee is liable only when there is dishonour by non payment.
Consequence of failure to give notice: Any person to whom notice of dishonour is not given is discharged from his obligations under the instrument. He is not liable to pay and no suit can be filed against him.
When notice of dishonour is excused: It is not necessary to give notice of dishonour in tne following cases and to the following parties :
- To the maker of a dishonoured promissory
- To the drawee or acceptor of a dishonoured bill or
- When it is dispensed with by the party entitled to
- In order to charge the drawer of a cheque when he has countermanded
- When the party charged could not suffer damage for want of
- When the party entitled to notice cannot be
- To charge the drawer when the acceptor is also the
- When the promissory note is not
- Where the party entitled to notice promises to pay the amount after the
- When the omission to give notice is caused by unavoidable
Mode of giving Notice of dishonour
- A notice of dishonour may be given to a duly authorised agent of the person to whom it is required to be
- If the person on whom notice is to be served has died, it should be given to his legal representative, or if he has been declared insolvent, to his
- The notice may be oral or written, rf it is written it may be sent by
- The notice may be in any form but the party to whom it is given must be informed, either in express terms or by reasonable intendment, that the instrument has been dishonoured and in what way and that he will be held liable
- It must be given within a reasonable time after
- The notice of dishonour must be given at the place of business, or if the party has no place of business, at the residence of the party for whom it is
- If the notice is duly directed and sent by post but is miscarried, such miscarriage does not render the notice
- When the party to whom notice of dishonour is despatched is dead but the sender is ignorant of his death, the notice given will be
- When the instrument is deposited with an agent for presentment, the agent is entitled to the same time to give notice to this principal as if he was the holder giving notice of dishonour and the principal is entitled to a further like period to give notice of dishonour.
- Any party receiving notice of dishonour, in order to render any party liable to himself, should give notice of dishonour to such party within a reasonable time, unless such party otherwise receives due
Noting (Sec. 99) : When a promissory note or a bill of exchange is dishonoured, the holder is entitled, after giving due notice of dishonour, to sue the drawer and the endorsers.
In order to have the fact of dishonour authenticated, the holder may get it recorded on the instrument, or on a paper attached to it, by a Notary Public. Such recording or notice must be done within a reasonable time after dishonour, and must contain the fact of the dishonour, the date Of dishonour, the reason if any, assigned for such dishonour.
If the instrument has riot been expressly dishonoured, the reason why the holder treats it as dishonoured should be noted as well as the notary’s charges. Noting is optional. It is to the advantage of the holder to get the notice done because it is an evidence of dishonour.
Protest (Sec. 100) : When a pronote or bill has been dishonoured, the holder may, within a reasonable time, cause such dishonour to be noted and certified by a notary public, such certificate is called a protest.
The difference between noting and protest is that noting is merely a record of the fact of dishonour. When the notary public issues a certificate stating the particulars regarding the dishonour, it is called a protest.
Noting and protest are not compulsory, in the case of an inland bill or note, but a foreign bill must be protested, if so required by the law of the place where it is drawn.
Protest for Better Security. When the accepptor of a bill of exchange has become insolvent, or his credit has been publicly impeached, before the maturity of the bill, the holder may within a reasonable time, employ a notary public to demand better security of the acceptor and on its request, may cause facts to be noted and certified within a reasonable time. Such certificate is called a “Protest for better security”.
The notary public is an officer appointed by the Government to exercise the functions of noting and protest, etc.
Discharge of Parties from Liabilites
The liability of a party to a negotiable instrument may be discharged or terminated in any one of the following ways –
- By payment in due course of the amount
- By the holder discharging or releasing the maker, acceptor or
- By cancellation of a party’s name by the
- By operation of law, g., by the insolvency of the debtor.
- By the holder allowing the drawee more than 48 hours of accepting the
- By taking qualified acceptance all previous parties are
- By non-presentment of a cheque for payment within a reasonable time of its issue, if the bank fails, the drawer is
- By endorsement of an order cheque by payee the banker is discharged by payment in due course, even if the endorsement turns out to be a . ,
- By material alteration. Any material alternation of a negotiable instrument renders the same void as against any one who is a party thereto at the time of alternation and does not consent Some examples of Material Alteration:
Alteration of (1) the date of the instruments or indorsements (2) the sum of payment, (3) the time of payment, (4) the place of payment, (5) the rate of interest, (6) the addition of a new party, (7) the tearing of the instrument in a material part, are material alteration.
A correction of a mistake, or an alteration made to carry out the common intention of the parties made before the instrument is issued or with the consent of the parties does not amount to a material alteration. It does not make the instrument void. When a person accepts an altered instrument;
he can not afterwards raise objections to those alterations which existed at the time of accepting the instrument. Where any material alteration is made by an endorsee it discharges his endorser from all liability to him in repect of consideration thereof (Sec. 87).
( BBA 1st Semester Business Low Notes )