1. payment in due course means payment made at or after maturity of the bill to the holder in good faith & withou notice that his title to the cheque is defective
2. What is a negotiable instrument?
2.1. A negotiable instrument is a signed document that promises a sum of payment to a specified person or the assignee. In other words, it is a formalized type of IOU: A transferable, signed document that promises to pay the bearer a sum of money at a future date or on-demand. The payee, who is the person receiving the payment, must be named or otherwise indicated on the instrument.
3. State the types of a negotiable instrument.
3.1. Bills of exchange
3.2. Cheques
3.3. Promissory notes
3.4. Bankers’ drafts
3.5. Bank notes
3.6. Treasury bills
3.7. Share warrants
3.8. Dividend warrants
3.9. Debentures
3.10. Travellers’ cheques
4. Define what is a cheque?
4.1. A cheque is defined in section 73 of the Bills of Exchange Act 1949 as 'a bill of exchange drawn on a banker on demand
5. State the characteristics of cheques
5.1. An unconditional order
5.2. In writing
5.3. Addressed by one person to another
5.4. Signed by the person giving it
5.5. Requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time
5.6. A sum certain in money
5.7. To the order of a specified person or to bearer
5.8. A bill of exchange must be supported by consideration
5.9. Capacity to contract by bill of exchange
5.10. Date of bill
6. What are the types of crossing on a cheque?
6.1. General Crossing – cheque bears across its face an addition of two parallel transverse lines.
6.2. Special Crossing – cheque bears across its face an addition of the banker’s name.
6.3. Restrictive Crossing – It directs the collecting banker that he needs to credit the amount of cheque only to the account of the payee.
6.4. Non-Negotiable Crossing – It is when the words ‘Not Negotiable’ are written between the two parallel transverse lines.
7. What is the protection of the paying banker?
7.1. A banker is not liable if he pays a cheque in due course - section 59
7.2. If the bankers pay in good faith and in the ordinary course of business, a cheque drawn on him which bears a forged/unauthorized indorsement, he is not prejudiced by the forgery - section 60
7.3. The paying banker is protected if he pays a cheque which is not indorsed or is irregulatly indorsed in good faith and in the ordinary course of business - section 82
7.4. If the paying banker pays a crossed cheque in good faith without negligence and in accordance with the crossing, he is not liable - section 80
