Legal Effect of Drawing or Indorsing a Bill
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Questions and Answers

What is the primary requirement for a document to be considered a bill of exchange?

  • It must be signed by the payee
  • It must be in electronic form
  • It must be payable on demand
  • It must be unconditional (correct)

    • What would make a bill of exchange invalid?

  • If it is payable at a fixed future time
  • If it has a qualification that makes payment uncertain (correct)
  • If it is written in ink
  • If it is signed by the drawer

    • What is an example of an unconditional order?

  • Pay C when he reaches 25 years old
  • Pay C when he passes his exams
  • Pay C's estate on C's death (correct)
  • Pay C a certain amount on a specific date

    • What is the consequence of a document not satisfying all the requirements of a bill of exchange?

    <p>The transferee will not obtain all the rights granted on the negotiation of a negotiable instrument</p> Signup and view all the answers

    What is the ruling in the case of Bavins and Sims V London and South Western Bank?

    <p>The instrument was not considered a cheque because it depended on a receipt being signed</p> Signup and view all the answers

    What is the legal effect of drawing a bill payable to a third party?

    <p>A conditional contract to pay the payee, his order, or the bearer</p> Signup and view all the answers

    What is a characteristic of a bill of exchange?

    <p>The amount must be certain in money</p> Signup and view all the answers

    What is the legal effect of accepting a bill?

    <p>An absolute contract to pay the payee, his order, or the bearer</p> Signup and view all the answers

    What is an example of a qualification that would make a bill of exchange invalid?

    <p>Pay C when he passes his exams</p> Signup and view all the answers

    How is a bill payable to bearer negotiated?

    <p>By delivery only</p> Signup and view all the answers

    What is required for a document to be considered a negotiable instrument?

    <p>It must be in writing and signed by the drawer</p> Signup and view all the answers

    What is the effect of indorsing a bill?

    <p>A conditional contract to pay the immediate or any succeeding indorsee, or bearer</p> Signup and view all the answers

    What is the significance of a person acquiring a negotiable instrument for value and in good faith?

    <p>They are entitled to ignore all previous claims to the document</p> Signup and view all the answers

    What is the most important type of negotiable instrument?

    <p>Bill of Exchange</p> Signup and view all the answers

    What is the relevance of the Bills of Exchange Act 1960 (Act 55)?

    <p>It codifies the custom and case law concerning bills of exchange</p> Signup and view all the answers

    Can a bill be a non-negotiable instrument?

    <p>Yes, it is possible for a bill to be non-negotiable</p> Signup and view all the answers

    What is the requirement for a holder in due course regarding notice of dishonour of the bill?

    <p>The holder must not have notice of the dishonour.</p> Signup and view all the answers

    What is the effect of taking a bill with notice of dishonour?

    <p>The defect of title attaches to the bill.</p> Signup and view all the answers

    What constitutes good faith in the context of a holder in due course?

    <p>Acting honestly and without knowledge of a defect in title.</p> Signup and view all the answers

    What is the distinction between particular notice and general notice?

    <p>Particular notice is of a specific fact, while general notice is of a general fraud.</p> Signup and view all the answers

    What is the effect of wilful or fraudulent absence of inquiry into the circumstances?

    <p>It amounts to a general notice.</p> Signup and view all the answers

    What is the requirement for a holder to be put on inquiry?

    <p>There must be some facts suggesting a defect in title.</p> Signup and view all the answers

    What is the significance of the case Midland Bank v. Reckitt?

    <p>It explained the distinction between particular and general notice.</p> Signup and view all the answers

    What is the consequence of mere negligence, however gross, in the context of a holder in due course?

    <p>It is evidence of notice.</p> Signup and view all the answers

    What is a promissory note?

    <p>An unconditional promise made by one person to another in writing</p> Signup and view all the answers

    What is the significance of Section 84 in relation to promissory notes?

    <p>It states that a promissory note is inchoate and incomplete until delivered to the payee or bearer</p> Signup and view all the answers

    What is a certificate of deposit?

    <p>A promise to pay issued by a banker acknowledging receipt of a deposit</p> Signup and view all the answers

    What is the main difference between a promissory note and a certificate of deposit?

    <p>A promissory note is a general promise to pay, while a certificate of deposit is a specific promise to repay a deposit</p> Signup and view all the answers

    What is a cheque, according to Section 72 of Act 55?

    <p>A bill of exchange drawn on a banker payable on demand</p> Signup and view all the answers

    What is the significance of the cases of Sabblah v. Tawiah and Directors of Orthodox Secondary School of Peki v. Tawlma-Abels?

    <p>They discuss the characteristics of a promissory note</p> Signup and view all the answers

    What is the meaning of 'payable at sight'?

    <p>Payable when it is seen for acceptance or for payment</p> Signup and view all the answers

    What is the issue with a bill payable 'on or before' a particular date?

    <p>It does not specify a fixed or determinable time</p> Signup and view all the answers

    What happens if the wrong date is inserted on a bill payable at a fixed period after date?

    <p>The holder in due course may obtain payment on the correct date</p> Signup and view all the answers

    What is a contingency in the context of a bill?

    <p>An event which is not certain to happen</p> Signup and view all the answers

    What is the effect of a bill being undated if it is payable at a fixed period after date?

    <p>It is not fatal, and a holder may insert the true date of issue</p> Signup and view all the answers

    What is the presumption regarding dates on a bill?

    <p>They are presumed to be correct unless the contrary is proved</p> Signup and view all the answers

    What is the difference between payable at sight and payable after sight?

    <p>Payable at sight means it is payable when it is seen for acceptance or for payment, while payable after sight means it is payable after a fixed period</p> Signup and view all the answers

    What is the result of an acceptance of a bill being the event that triggers payment?

    <p>The document is invalid because it is a contingency</p> Signup and view all the answers

    Study Notes

    Form of a Bill of Exchange

    • A bill of exchange must be unconditional, in writing, signed by the drawer, and payable on demand or at a fixed or determinable future time.
    • The amount must be certain in money.
    • If the document does not satisfy these requirements, it will not amount to a bill of exchange, and the transferee will not obtain all the rights granted on the negotiation of a negotiable instrument.

    Unconditional Order

    • An unconditional order means that there must be no qualification which would make payment uncertain or give rise to cumbersome inquiries.
    • Example: A bill that specifies "pay C when he passes his exams" would not be valid, even if C did pass his exams.
    • Death is not uncertain, although the time at which it happens, of course, is; therefore, an instrument that says "pay C's estate on C's death" would be valid.

    Payable on Demand

    • A bill is payable on demand, meaning it is payable immediately, either when it is expressed to be payable, or when it is payable at sight or on presentation, or when no time for payment is expressed.
    • Payable at sight means that it is payable when it is seen for acceptance or for payment.

    Payable at a Fixed or Determinable Future Time

    • A bill may be payable at a fixed period after date or sight.
    • If it is after sight (e.g., 90 days after sight), it becomes mature and payable only on the day which is 90 days after acceptance or protest for non-acceptance.
    • If it is payable at a fixed period after an event which is bound to happen (even if the date is uncertain), it is valid.
    • If a drawer draws a bill payable to a third party, it is a contract by the drawer to pay the payee, his order, or the bearer, as the case may be, conditionally on the acceptor's (or drawee's) failing to do so.
    • The legal effect of accepting a bill is an absolute contract on the part of the acceptor to pay the payee, his order, or the bearer as the instrument may require.
    • The legal effect of making a note is an absolute contract on the part of the maker to pay the payee, his order, or the bearer as the instrument may require.
    • The legal effect of indorsing a bill is a conditional contract on the part of the indorser to pay the immediate or any succeeding indorsee, or bearer, in case of the acceptor's default.

    Negotiating a Bill

    • A bill is negotiated when it is transferred from one person to another in such a manner as to constitute the transferee the holder of the bill.
    • A bill payable to bearer is negotiated by delivery.
    • A bill payable to order is negotiated by the endorsement of the holder completed by delivery.
    • A person who acquires a negotiable instrument for value and in good faith is entitled to ignore all previous claims to the document.

    Holder in Due Course

    • A holder in due course must not have any notice of any dishonour of the bill in question.
    • According to Section 34(5), where a bill which is not overdue has been dishonoured, any person who takes it with notice of the dishonour takes it subject to any defect of title attaching thereto at the time of dishonour.
    • Such a defect will not affect a holder in due course who takes the bill without notice of the dishonour.

    Good Faith

    • The holder of the instrument must have acted in good faith, i.e., honestly, without knowledge of any defect in title of a previous holder.
    • Mere negligence, however gross, will not of itself amount to lack of good faith, but it may be evidence of notice.

    Notice

    • Notice may be particular (express) or general.
    • Particular notice is where the holder had notice of the particular facts avoiding the bill.
    • General notice is where the holder had notice that there was some illegality or some fraud vitiating the bill, though he may not have been apprised of its precise nature.

    Promissory Note

    • A promissory note is an unconditional promise in writing, made by one person to another, signed by the maker, engaging to pay a sum certain in money, on demand, or at a fixed or determinable future time, to, or to the order of, a specified person or to bearer.
    • For cases discussing the characteristics of a promissory note, see Sabblah v.Tawiah GLR 145 and Directors of Orthodox Secondary School of Peki v.Tawlma-Abels 1 GLR 419.

    Certificates of Deposit

    • A certificate of deposit is a promise to pay issued by a banker.
    • By a certificate of deposit, a bank acknowledges that it has received a deposit from the depositor, and promises to repay the depositor upon demand.

    Cheques

    • A cheque is a bill of exchange drawn on a banker payable on demand.
    • Section 72 of Act 55 provides that a cheque is a bill of exchange drawn on a banker payable on demand.

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    Description

    This quiz covers the legal implications of drawing and indorsing bills, including the contracts and obligations of the drawer and acceptor.

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