Mercantile Law

Meaning and Types of Hundis

A Hundi is a negotiable instrument written in an oriental (vernacular) language.   The term ‘Hundi’ includes all indigenous negotiable instruments whether they are in the form of notes or bills.   But they are mostly of the nature of bills of exchange.   They are virtually inland bills of exchange and recognized by custom and law in India.   The term comes from the Sanskrit word Hund which means to collect.   It means that Hundis were used as means of collection of debts.   Hundis are very popular among the Indian merchants and indigenous bankers from ancient times.

The Negotiable Instruments act does not apply to Hundis.  … Read the rest

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Cheque: Definition, Features and its Types

Cheque is a very common form of negotiable instrument. If you have a savings bank account or current account in a bank, you can issue a cheque in your own name or in favor of others, thereby directing the bank to pay the specified amount to the person named in the cheque. Therefore, a cheque may be regarded as a bill of exchange; the only difference is that the bank is always the drawee in case of a cheque. The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand.… Read the rest

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What is a Bill of Exchange?

According to section 5 of the Negotiable Instruments Act, 1881, defines Bill Of Exchange as “A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”

A promise or order to pay is not “conditional”, within the meaning of this section and section 4, by reason of the time for payment of the amount or any installment thereof being expressed to be on the lapse of certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.… Read the rest

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Definition and Features of Promissory Note

Promissory Note, in the law of negotiable instruments, written instrument containing an unconditional promise by a party, called the maker, who signs the instrument, to pay to another, called the payee, a definite sum of money either on demand or at a specified or ascertainable future date. The note may be made payable to the bearer, to a party named in the note, or to the order of the party named in the note.

A promissory note differs from an IOU(An IOU (abbreviated from the phrase “I owe you“) is usually an informal document acknowledging debt) in that the former is a promise to pay and the latter is a mere acknowledgement of a debt.… Read the rest

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Features of Negotiable Instruments

Negotiable Instrument, in law, a written contract or other instrument whose benefit can be passed on from the original holder to new holders. The original holder (the transferor) must countersign the instrument (as in the case of a cheque) or merely deliver it (as in the case of a bank note) to the new holder; the new holder is then entitled to the benefit of the instrument (in the case of a cheque, to the money from the bank; in the case of the bank note, to the sum promised on the note).

According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means “Promissory note, bill of exchange, or cheque, payable either to order or to bearer”.… Read the rest

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Discharge of a Contract by Breach

Discharge of contract means parties to the contract is no more liable to the contract. In other words, the liability of the parties to the contract will come to an end.

Discharge by breach of contract: Breach of contract by a party thereto is also a method of discharge of a contract, because “breach” also brings to an end the obligations created by a contract on the part of each of the parties. Of course the aggrieved party i.e., the party not at fault can sue for damages for breach of contract as per law; but the contract as such stands terminated.… Read the rest

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