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payment, must compensate the drawer for any loss or damage caused by such default.

32. In the absence of a contract to the contrary, the maker of a pro- Liability of missory note and the acceptor before maturity of a bill of exchange are

maker of note

and acceptor bound to pay the amount thereof at maturity according to the apparent of bill. tenor of the note or acceptance respectively, and the acceptor of a bill Eng. Act, ss. of exchange at or after maturity is bound to pay the amount thereof to 54, 88. the holder on demand.

In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.

33. No person except the drawee of a bill of exchange, or all or some Only drawee of several drawees, or a person named therein as a drawee in case of can be acceptor need, or an acceptor for honour, can bind himself by an acceptance.

except in need

or for honour. 34. Where there are several drawees of a bill of exchange who are Acceptance by

8. 6 (2), note b. not partners, each of them can accept it for himself, but none of them several drawees can accept it for another without his authority.

not partners.

ss. 6 (2), 41 35. In the absence of a contract to the contrary, whoever ind ses

(16).

Liability of and delivers a negotiable instrument before maturity, without, in such indorser. indorsement, expressly excluding or making conditional his own liability, s. 55 (2a). is bound thereby to every subsequent holder, in case of dishonour by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonour, provided due notice of dishonour has been given to, or received by, such indorser as hereinafter provided.

Every indorser after dishonour is liable as upon an instrument payable on demand.

36. Every prior party to a negotiable instrument is liable thereon to Liability of a holder in due course until the instrument is duly satisfied.

prior parties

to holder in 37. The maker of a promissory note or cheque, the drawer of a bill due course.

s. 29 (3). of exchange until acceptance, and the acceptor are, in the absence of a

Maker, drawer contract to the contrary, respectively liable thereon as principal debtors, and acceptor and the other parties thereto are liable thereon as sureties for the maker, principals.

ss. 54, 88, drawer or acceptor, as the case may be.

note (a),

85, note (a). 38. As between the parties so liable as sureties, each prior party is, Prior party a in the absence of a contract to the contrary, also liable thereon as a principal in principal debtor in respect of each subsequent party.

respect of each subsequent

party. Nlustration. A draws a bill payable to his own order on B, who accepts. A afterwards indorses the bill to C, C to D, and D to E. As between E and

s. 55.

B, B is the principal debtor, and A, C and D are his sureties. As between E and A, A is the principal debtor, and C and D are his sureties. As between E and C, C is the principal debtor and D is his surety.

Suretyship.

39. When the holder of an accepted bill of exchange enters into any contract with the acceptor which, under section 134 or 135 of the Indian Contract Act, 1872, would discharge the other parties, the holder may expressly reserve his right to charge the other parties, and in such case they are not discharged.

40. Where the holder of a negotiable instrument, without the consent of the indorser, destroys or impairs the indorser's remedy against a prior party, the indorser is discharged from liability to the holder to the same extent as if the instrument had been paid at maturity.

Discharge of
indorser's
liability.
Eng. Act, ss.
62, 63 (2).

Illustration.

A is the holder of a bill of exchange made payable to the order of B, which contains the following indorsements in blank :

First indorsement, "B."
Second indorsement, “ Peter Williams."
Third indorsement, “Wright & Co."

Fourth indorsement, “ John Rozario."
This bill A puts in suit against John Rozario and strikes out, without
John Rozario's consent, the indorsements by Peter Williams and Wright
& Co. A is not entitled to recover anything from John Rozario.

Acceptor 41. An acceptor of a bill of exchange already indorsed is not relieved bound, from liability by reason that such indorsement is forged, if he knew or although

had reason to believe the indorsement to be forged when he accepted indorsement forged.

the bill. s.54(2),note(t). Acceptance of 42. An acceptor of a bill of exchange drawn in a fictitious name bill drawn in

and payable to the drawer's order is not, by reason that such name is fictitious name.

fictitious, relieved from liability to any holder in due course claiming 8. 54 (2b).

under an indorsement by the same hand as the drawer's signature, and

purporting to be made by the drawer. Negotiable

43. A negotiable instrument made, drawn, accepted, indorsed or instrument transferred without consideration, or for a consideration which fails, made, &c.,

creates no obligation of payment between the parties to the transaction. without consideration, But if any such party has transferred the instrument with or without s. 28 (2). indorsement to a holder for consideration, such holder, and every ss. 27 (2), 23, subsequent holder deriving title from him, may recover the amount due 23 (3).

on such instrument from the transferor for consideration or any prior party thereto.

Exception 1.--No party for whose accommodation a negotiable instru

ment has been made, drawn, accepted or indorsed can, if he have paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation.

Exception 11.—No party to the instrument who has induced any other party to make, draw, accept, indorse or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover thereon an amount exceeding the value of the consideration (if any) which he has actually paid or performed.

44. When the consideration for which a person signed a promissory Partial absence note, bill of exchange or cheque consisted of money, and was originally or failure of absent in part or has subsequently failed in part, the sum which a sideration. holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

Explanation.—The drawer of a bill of exchange stands in immediate relation with the acceptor. The maker of a promissory note, bill of exchange or cheque 'stands in immediate relation with the payee, and the indorser with his indorsee. Other signers may by agreement stand in immediate relation with a holder,

Illustration.

A draws a bill on B for Rs. 500 payable to the order of A. B accepts the bill, but subsequently dishonours it by non-payment. A sues B on the bill. B proves that it was accepted for value as to Rs. 400, and as an accommodation to the plaintiff as to the residue. A can only recover Rs. 400.

45. Where a part of the consideration for which a person signed a Partial failure promissory note, bill of exchange or cheque, though not consisting of of considera

tion not conmoney, is ascertainable in money without collateral enquiry, and there

sisting of has been a failure of that part, the sum which a holder standing in money. immediate relation with such signer is entitled to receive from him is proportionally reduced.

CHAPTER IV.

OF NEGOTIATION.

46. The making, acceptance or indorsement of a promissory note, Delivery. bill of exchange or cheque is completed by delivery, actual or Eng. Act, s. 21 constructive.

(1). As between parties standing in immediate relation, delivery to be s. 21 (2a). effectual must be made by the party making, accepting or indorsing the instrument, or by a person authorized by him in that behalf. As between such parties and any holder of the instrument other than s. 21 (26).

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Eng. Act, s. 31
(2).
s. 31 (3).

a holder in due course, it may be shown that the instrument was
delivered conditionally or for a special purpose only, and not for the
purpose of transferring absolutely the property therein.

A promissory note, bill of exchange or cheque payable to bearer is
negotiable by the delivery thereof.

A promissory note, bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof.

47. Subject to the provisions of section fifty-eight, a promissory note, bill of exchange or cheque payable to bearer is negotiable by delivery thereof.

Exception.-A promissory note, bill of exchange or cheque delivered on condition that it is not to take effect except in a certain event, is not negotiable (except in the hands of a holder for value without notice of the condition) unless such event happens.

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Illustrations,
(a) A, the holder of a negotiable instrument payable to bearer,
delivers it to B's agent to keep for B. The instrument has been
negotiated.

(6) A, the holder of a negotiable instrument payable to bearer,
which is in the hands of A's banker, who is at the time the banker
of B, directs the banker to transfer the instrument to B's credit in
the banker's account with B. The banker does so, and accordingly
now possesses the instrument as B's agent. The instrument has been

negotiated, and B has become the holder of it. Negotiation by 48. Subject to the provisions of section fifty-eight, a promissory indorsement.

note, bill of exchange or cheque payable to the order of a specified s. 31 (3).

person, or to a specified person or order, is negotiable by the holder by

indorsement and delivery thereof. Conversion of 49. The holder of a negotiable instrument indorsed in blank may, indorsement in without signing his own name, by writing above the indorser's signablank into indorsement in

ture a direction to pay to any other person as indorsee, convert the full.

indorsement in blank into an indorsement in full; and the holder does s. 34 (4).

not thereby incur the responsibility of an indorser. Effect of

50. The indorsement of a negotiable instrument followed by delivery indorsement.

transfers to the indorsee the property therein with the right of further s. 31 (1). negotiation; but the indorsement may, by express words, restrict or

exclude such right, or may merely constitute the indorsee an agent to
indorse the instrument, or to receive its contents for the indorser, or for
some other specified person.

Illustrations,
B signs the following indorsements on different negotiable instru-
ments payable to bearer :-

8. 35.

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(a) “Pay the contents to C only."
(6) “Pay C for my use."
(c) “Pay C or order for the account of B.”
(d) “ The within must be credited to C.”
These indorsements exclude the right of further negotiation by C.
(e) “Pay C.”
(f) “Pay C value in account with the Oriental Bank.”
(9) “ Pay the contents to C, being part of the consideration in a

certain deed of assignment executed by C to the indorser and

others." These indorsements do not exclude the right of further negotiation

by C.

51. Every sole maker, drawer, payee or indorsee, or all of several Who may joint makers, drawers, payees or indorsees, of a negotiable instrument negotiate. may, if the negotiability of such instrument has not been restricted or excluded as mentioned in section fifty, indorse and negotiate the same.

Explanation. Nothing in this section enables a maker or drawer to indorse or negotiate an instrument, unless he is in lawful possession or is holder thereof; or enables a payee or indorsee to indorse or negotiate an instrument, unless he is holder thereof.

Illustration,

A bill is drawn payable to A or order. A indorses it to B, the indorsement not containing the words “ or order

or any equivalent words. B may negotiate the instrument.

52. The indorser of a negotiable instrument may, by express words Indorser who, in the indorsement, exclude his own liability thereon, or make such excludes his liability or the right of the indorsee to receive the amount due thereon

own liability

or makes it depend upon the happening of a specified event, although such event conditional. may never happen.

Eng. Act, s. 32 Where an indorser so excludes his liability and afterwards becomes

(6). the holder of the instrument, all intermediate indorsers are liable to him.

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Illustrations.

(a) The indorser of a negotiable instrument signs his name, adding the words

“ Without recourse.”
Upon this indorsement he incurs no liability.

(b) A is the payee and holder of a negotiable instrument. Excluding personal liability by an indorsement “ without recourse," he transfers the instrument to B, and B indorses it to C, who indorses it to A. A is not only reinstated in his former rights, but has the rights of an indorsee against B and C.

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