Tamil Nadu Class 12 Commerce Negotiable Instruments Act 1881 Notes — Samacheer Kalvi

Quick Summary

Negotiable instruments make business payments easier by allowing money claims to be transferred. The three central instruments are promissory note, bill of exchange, and cheque.

Meaning and Features

• Written document
• Unconditional promise or order
• Payable in money
• Certain parties
• Certain amount
• Transferable by delivery or endorsement
• Holder may obtain title and payment rights

Main Instruments

Promissory Note

A written promise made by one person to pay a certain sum to another person.

Parties:

• Maker
• Payee

Bill of Exchange

A written order given by one person directing another to pay a certain amount to a third person.

Parties:

• Drawer
• Drawee
• Payee

Cheque

A bill of exchange drawn on a banker and payable on demand.

Parties:

• Drawer
• Drawee bank
• Payee

Comparison

Important Terms

• Endorsement
• Holder
• Holder in due course
• Dishonour
• Crossing of cheque

Important Questions

One Mark

1. Define negotiable instrument. 2. Name the parties to a promissory note. 3. Which instrument is always drawn on a banker?

Short Answer

1. State any three features of negotiable instruments. 2. Distinguish between promissory note and bill of exchange. 3. Name the parties to a cheque.

Long Answer

1. Explain the features of negotiable instruments. 2. Distinguish among promissory note, bill of exchange, and cheque. 3. Explain the parties connected with negotiable instruments.

Common Mistakes

• Calling a promissory note an order instead of a promise.
• Forgetting that a cheque is always drawn on a bank.
• Mixing drawer and drawee.
• Writing only instrument names without parties.

Revision Checklist

• [ ] Meaning and features
• [ ] Three instruments
• [ ] Parties to each
• [ ] Comparison table
• [ ] Holder and endorsement terms