Bill of Exchange – Definition According to section of the Negotiable Instruments Act, “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”. 12th Commerce Unit - - . . AM pencil, bankers never accept it because of risks involved.
Alternation is quite easy but detection impossible in such cases. (ii) Unconditional Orders The instrument must contain an order to pay money. It is not necessary that the word ‘order’ or its equivalent must be used to make the document a cheque. It does not cease to be a cheque just because the world ‘please’ is used before the word pay.
Further the order must be unconditional. In other words, payment of money is made dependent on the happening of an event or on a fulfilment of a condition, the instrument loses the characteristics of a cheque. (iii) Drawn on a Specified Banker Only The cheque is always drawn on a specified banker. A cheque vitally differs from a bill in this respect as latter can be drawn on any person including a banker.
The customer of a banker can draw the cheque only on the particular branch of the bank where he has an account. (iv) A Certain Sum of Money Only The order must be for payment of only money. If the banker is asked to deliver securities, the document cannot be called a cheque. Further, the sum of money must be certain.
(v) Payee to be Certain The cheque must be made payable to a certain person or to the order of a certain person or to the bearer of the instrument. The word, person includes bodies corporate, local authorities, associations, holders of office of an institution etc., (vii) Signed by the Drawer The cheque is to be signed by the drawer. Further, it should tally with specimen signature furnished to the bank at the time of opening the account. (viii) Payable Always on Demand A cheque is always payable on demand.
The words on demand are not used when the drawee bank is asked to pay and the time for its payment is not specified, it is considered to be payable on demand.