mati khan ahmadzai

1. PARTIES OF NEGOTIABLE
INSTRUMENTS.
Business and Labor Law.
Presented by: Matiullah. (11170)
Assigned by: Sir Furqan.

2. Negotiable Instrument:
• A negotiable instrument is a document guaranteeing the payment
of a specific amount of money, either on demand, or at a set time,
with the payer named on the document.
• Example: promissory Notes, Bills of exchange, cheque etc.

3. Holder :
• The person who has the legal right to enforce a Negotiable
Instrument(promissory Notes, Cheque etc.)
• When the Note, Bill or Cheque is lost or destroyed ,it is deemed to
be continue of its holder.

4. Conditions to become a holder.
To become a holder, a person must satisfy the following conditions:
1. ENTITLED TO POSSESS: The person must have a legal right to
possess the instrument.
2. The person must be named in the instrument as the bearer (the
person who presents for payment).

5. Conditions to become a holder. (cont)
2. ENTITLED TO RECEIVE THE AMOUNT: The person must have the
right to receive the amount of the instrument and give a valid
discharge to the payer.
3. ENTITLED TO NEGOTIATE AND SUE: The person must have the
right to receive and negotiate it further according to the law. He
may also sue on such instrument in his own name for payment.

6. HOLDER IN DUE COURSE
• An individual who takes a Commercial Paper for value, in Good
Faith, with the belief that it is valid, with no knowledge of any
defects.
• Holder in due course is a person who takes possession of the
negotiable instruments in good faith and for consideration.

7. HOLDER IN DUE COURSE (cont…)
• To become a holder in due course the folling conditions must be
fulfilled.
• CONDITIONS:
1. Holder
2. Lawful consideration
3. Holder before maturity
4. Complete and regular
5. Holder in good faith

8. HOLDER IN DUE COURSE (cont…)
• PRIVILEGES:
I. Better titled
II. Transfer of good title
III. Incomplete stamped instrument
IV. Prior parties
V. Fictitious bill
VI. Instrument without consideration
VII. Conditional instrument
VIII. Validity of instrument
IX. Payee’s incapacity to endorse
X. Capacity of prior parties

9. HOLDER VS HOLDER IN DUE COURSE
Consideration
Maturity
Good faith
Title
Enforcement of rights
Privileges

10. JOINT HOLDER
• When there are several payees or endorsees in a bill, all of them
are joint holders and none of them can alone negotiate or sue on
it. All of them must join to negotiate or sue on it. If one of them is
dead, all the legal representatives of the deceased must join with
the surviving payee to negotiate the instrument or sue on it

11. DRAWEE IN CASE OF NEED

12. ACCEPTANCE OF HONOR.
• Sometimes, the original drawee refuses to accept the bill or
refuses to provide better security when demanded by the notary.
In such a case, any person may voluntarily accept the bill in order
to safeguard the honor of the drawer. Such person is known as the
acceptor for honor. [Sec 108-109]

13. CAPACITY OF PARTIES.
• The position of different persons is as follow. [Sec. 26-29]
1. Minor.
2. Insolvent.
3. Person of unsound mind.
4. Joint stock company.
5. Partner.
6. Agent.
7. Legal Heirs.

14. LIABILITIES OF PARTIES.
• The following is the nature of liabilities of various parties:
1. Drawer.
2. Drawee of cheque.
3. Maker of note and acceptor of bill.
4. Endorser.
5. Prior parties to holder in Due course.
6. Maker, Drawer and Acceptor as principles.
7. Prior party to subsequent party.
8. Accommodation party.
9. Surety ship.