Modes negotiable instrument can be discharged from liability

by • 06/01/2013 • GeneralComments (0)324

Q.5 what are the various modes in, which the parties to the negotiable instrument can be discharged from liability?

 

Ans: The following are the various modes in which the parties to the negotiable instrument can be discharged from liability.

 

1. BY CANCELLATION

When the holder of a negotiable instrument cancels the name of any party, (acceptor or endorser to the negotiable instrument with the intention of discharging him from the liability, such party and all other person between the holder and such party are discharged from liability. But when such cancellation is made unintentionally or by mistake will not discharged any party from liability.

 

2. BY RELEASE

When the holder of a negotiable instrument releases any party to the instrument by any method other than cancellation, the party so released is discharged from liability. When the holder of the instrument is satisfied other than payment is cash or substitutes the old instrument with the new one will discharge the parties concerning with old instrument.

 

3. BY PAYMENT

Where the negotiable instrument is payable to bearer or has been endorsed in blank, the parties to the instrument are discharged from the liability when the maker, acceptor or endorser makes payment in due course.

 

4. BY ALLOWING EXTRA TIME TO DRAWEE

If the holder of a bill of exchange allows the drawee more than forty eight hours exclusive of public holiday to consider whether he will accept the same, all previous parties not consisting to such allowance are there by discharged from liability to such holder. Sec 83.

 

5. BY DELAY PRESENTMENT OF CHEQUE

When the cheque is not presented for payment within a reasonable time of its issue and bank become insolvent and the drawer suffers actual damages through the delay, he is discharged to the extent to which such drawer is the creditor of the bank but no more.

 

ILLUSTRATION

A having funds Rs. 5OOO/ in bank draws a cheque for Rs. 2000/. Before the presefltat1o of the cheque for payment, the bank become insolvent, the drawer will be discharged from liability to the extent of Rs. 2000/ because he has suffered toss for the full amount of the cheque.

 

6. DISCHARGED BY BANKER’S LIABILITY

When the cheque is payable to order purports to be endorsed by or on behalf of the payee and the banker pays it in due course, the banker is discharged and he can debit his customers account with the amount so paid, though payee’s agent without his authority might have placed the endorsement on the cheque.

 

7. BY QUALIFIED ACCEPTANCE

When the holder of the instrument obtain qualified acceptance with regard to the sum, substitute the place and time of payment without the consent of all other parties to the negotiable instrument, all the previous parties whose consent is not obtained to such acceptance are discharged from liability. Sec 86

 

B. DISCHARGE BY MATERIAL ALTERATION

Any material alteration like change of data rate of interest place and time of payment etc. by party to negotiable instrument without the consent of all other parties discharged from liability to all previous parties whose consent is not obtained.

 

9. BY BILL IN ACCEPTOR’S HAND

The maker drawer, acceptor or endorser of a negotiable instrument is discharged from liability therefore when the person liable thereon as principle debtor becomes the holder thereof at or after its maturity. Sec 90

 

10. BY OPERATION OF LAW

The liability of the maker acceptor or endorser can be discharged by operation of law e.g. drawer of the instrument is declared as insolvent by the court of law, now he will be discharged from liability.

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