promissory notes

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it is amy presentation on promissory notes keeping in view negotiable instrument ac 1881 india, pakistan

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Promissory Notes Promissory Notes

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Presentation ByPresentation ByNASIR MUHAMMAD (BP10-38) group leaderNASIR MUHAMMAD (BP10-38) group leader

MUHAMMAD ISRAR (BP10-14)MUHAMMAD ISRAR (BP10-14)

ASIF IQBAL (BP10-16)ASIF IQBAL (BP10-16)

MUNEEB AHMAD (BP10-07)MUNEEB AHMAD (BP10-07)

AKHTER MUNIR (BP10-44)AKHTER MUNIR (BP10-44)

THASBEEH ULLAH (BP10-85)THASBEEH ULLAH (BP10-85)

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ContentsContents

NEGOTIABLE INSTRUMENT NEGOTIABLE INSTRUMENT ACT 1881ACT 1881

Promissory NotesPromissory Notes EssentialsEssentials PartiesParties TypesTypes Structure and contentStructure and content Holder and Holder in due Holder and Holder in due

coursecourse NegotiationNegotiation

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The Negotiable instruments Act, The Negotiable instruments Act, 18811881

Definition:Definition:

Section 13 of the Negotiable Instrument Act, 1881, Section 13 of the Negotiable Instrument Act, 1881, defines a negotiable instrument as: “A negotiable instrument defines a negotiable instrument as: “A negotiable instrument means a promissory note, bill of exchange or cheque means a promissory note, bill of exchange or cheque payable either to order or to bearer.”payable either to order or to bearer.”

Negotiable instrument means transferable document.Negotiable instrument means transferable document.   Explanation:Explanation: The Act shows types of instruments, viz., The Act shows types of instruments, viz., Promissory Promissory

Notes, Bills of Exchange and Cheques.Notes, Bills of Exchange and Cheques. A negotiable instrument is one which entitles the A negotiable instrument is one which entitles the

holder to the receipt of money.holder to the receipt of money. right to transfer the same by mere delivery or endorsement .right to transfer the same by mere delivery or endorsement . The negotiability of the instrument continues till its maturity.The negotiability of the instrument continues till its maturity.

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Promissory Notes Promissory Notes (Section 4)(Section 4)

Definition:Definition:

Section 4 defines a promissory notes as Section 4 defines a promissory notes as under: “A ‘promissory note’ is an under: “A ‘promissory note’ is an instrument in writing (not being a bank-instrument in writing (not being a bank-note or a currency-note), containing an note or a currency-note), containing an unconditional undertaking, signed by the unconditional undertaking, signed by the maker, to pay a certain sum of money only maker, to pay a certain sum of money only to, or to the order of a certain person, or to to, or to the order of a certain person, or to the bearer of the instrument.”the bearer of the instrument.”

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Essentials of Promissory notesEssentials of Promissory notes It must be in writing.It must be in writing. Contains a promise to pay.Contains a promise to pay. Signed by the Maker.Signed by the Maker. definite and Unconditional Promisedefinite and Unconditional Promise Promise to Pay Money OnlyPromise to Pay Money Only Payee must be CertainPayee must be Certain Sum Payable must be CertainSum Payable must be Certain Payable on Demand or After a Definite Payable on Demand or After a Definite

Period of TimePeriod of Time

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Parties to a promissory notesParties to a promissory notes MAKERMAKER : : The person who makes the promissory note and promises to The person who makes the promissory note and promises to

pay is called the Maker.pay is called the Maker.

PAYEEPAYEE:: The person to whom the payment is to be made is called the The person to whom the payment is to be made is called the Payee.Payee.

HOLDERHOLDER: The holder is either the payee or someone to whom he may : The holder is either the payee or someone to whom he may have indorsed (transfer) the note is known as Holder.have indorsed (transfer) the note is known as Holder.

ENDORSERENDORSER: The person who indorses the note to another is called the : The person who indorses the note to another is called the Endorser .Endorser .

ENDORSEEENDORSEE: The person to whose favor the note is endorsed is called : The person to whose favor the note is endorsed is called the Endorseethe Endorsee

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Types of promissory notesTypes of promissory notes 4 Types of Promissory Notes4 Types of Promissory Notes

Promissory notes payable on demand;Promissory notes payable on demand;

Promissory notes payable after date;Promissory notes payable after date;

Joint promissory notesJoint promissory notes

Joint and several promissory notesJoint and several promissory notes

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Structure and content of Structure and content of promissory notepromissory note

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Holder and Holder in due courseHolder and Holder in due course

Holder:

any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties there to.----Sec.8

In order to be called as a ‘holder’ a person must satisfy the following two conditions:

He must be entitled to the possession of the instrument in his own name.

He must be entitled to receive or recover the amount due thereon from the parties liable thereto.

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Contt…Contt… Holder in due course

The holder of a negotiable instrument is called the holder in due course if he satisfies the following conditions.----Sec 9

1. He must be a holder.

2. He obtained the instrument for valuable consideration i.e. lawful consideration

3. He became holder of the instrument before its maturity, i.e. before the amount mentioned in it became payable.

4. He had no cause to believe that any defect existed in the title of the person from whom he derived his title

e.g. A post dated cheque does not indicate any defective title and therefore the transferee of such a cheque may be a holder in due course if the other conditions are satisfied.

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Negotiation of Promissory NotesNegotiation of Promissory Notes

Definition:Definition:

Negotiation of an instrument is the process by which the Negotiation of an instrument is the process by which the ownership of the instrument is transferred from one person to ownership of the instrument is transferred from one person to another.another.

Transfer with an intention to transfer the title of the instrument.Transfer with an intention to transfer the title of the instrument.

Negotiation by delivery (Sec. 47):Negotiation by delivery (Sec. 47):

Where a promissory note or a bill of exchange or a cheque is Where a promissory note or a bill of exchange or a cheque is payable to a bearer, it may be negotiated by delivery thereof. Example: payable to a bearer, it may be negotiated by delivery thereof. Example: A the holder of a negotiable instrument payable to bearer, delivers it to A the holder of a negotiable instrument payable to bearer, delivers it to B’s agent to keep it for B. The instrument has been negotiated.B’s agent to keep it for B. The instrument has been negotiated.

Negotiation by endorsement and delivery (Sec. 48): Negotiation by endorsement and delivery (Sec. 48):

A promissory note, a cheque or a bill of exchange payable to A promissory note, a cheque or a bill of exchange payable to order can be negotiated only be endorsement and delivery. Unless the order can be negotiated only be endorsement and delivery. Unless the holder signs his endorsement on the instrument and delivers it, the holder signs his endorsement on the instrument and delivers it, the transferee does not become a holder. If there are more payees than transferee does not become a holder. If there are more payees than one, all must endorse itone, all must endorse it

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Who may negotiate?Who may negotiate?

The sole maker, drawer, payee or endorsee and all of them The sole maker, drawer, payee or endorsee and all of them jointly can negotiate an instrument, provided its jointly can negotiate an instrument, provided its negotiability has not been restricted or excluded by a term negotiability has not been restricted or excluded by a term used in the instrumentused in the instrument.------Sec. 51..------Sec. 51.

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