B.Com 1st Year Negotiable Instrument Act 1881 Long Notes

B.Com 1st Year Negotiable Instrument Act 1881 Long Notes :- In this post is very useful for BCOM Students you will get full information related to Definition of negotiable instruments; Features; Promissory note; Bill of exchange and cheque; Holder and holder in the due course; Crossing of a cheque, types of crossing; Negotiation; Dishonour and Discharge of negotiable instrument. Study Material Notes available.


Q.1. What is a promissory note? Why are the bill of exchange, promissory note and cheque called negotiable instruments?

Ans. Promissory Note: A ‘promissory note’ is an instrument in writing, containing unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to order of a certain person, or to the bearer of instrument.

The person who makes the promissory note and promises to pay is called the maker. The person to whom the payment is to be made is called the payee.

Characteristics: For an instrument to become a ‘promissory note, it must have the following essential elements:

1. The instrument must be in writing.

2. The instrument must contain an express promise to pay. A mere acknowledgement of indebtedness is not sufficient.

3. The promise to pay must be definite and unconditional.

4. The instrument must be signed by the maker, otherwise it is incomplete and has no effect.

5. The instrument must point out with certainty as to who the maker is and who the payee is, where the maker and the payee cannot be identified with certainty from the instrument itself, the instrument, even if it contains an unconditional promise to pay, is not a promissory note.

6. The sum payable must be certain and must not be capable of contingent additions or subtractions.

Bill of Exchange: 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 instrument.

The person who gives the order to pay or who makes the bill is called the drawer. The person who is directed to pay is called the drawee. The person to whom the payment is to be made is called the payee.

Characteristics: For an instrument to become a bill of exchange, it must have the following essential elements:

1. It must be in writing.

2. It must contain an unconditional order to pay.

3. It requires three parties, i.e. the drawer, drawee and the payee.

4. The parties must be certain.

5. It must be signed by the drawer.

6. The sum payable must be certain

Cheque: A cheque is a bill of exchange drawn upon a specified banker and payable on demand. A cheque is a species of bill of exchange, but it has the following two additional qualifications, namely:

1. It is always drawn on a specified banker, and

2. It is always payable on demand.

Q.2. Give the suitable examples of negotiable, non-negotiable and quasi-negotiable instruments. What are the presumptions as to negotiable instruments?

Ans. Negotiable Instrument: The following instruments have been recognised as negotiable instruments by statute or by usage or custom:

1. Bills of exchange.

2. Promissory notes.

3. Cheques.

4. Government promissory notes.

5. Treasury bills.

6. Dividend warrants.

7. Share warrants.

8. Bearer debentures.

9. Trust or improment trust debentures.

10. Hundis.

11. Railway bonds payable to bearer.

Non-negotiable Instruments: The examples of non-negotiable instruments are as follows:

1. Money orders.

2. Postal orders.

3. Fixed deposit receipts.

4. Share certificates.

5. Letters of credit.

Quasi-negotiable Instruments: The examples of quasi-negotiable instruments are as follows:

1. Bills of lading

2. Dock warrants.

3. Railway receipt.

4. Wharfinger certificates.

presumptions as to Negotiable Instruments: Sections 118 and 119 lay down the following resumptions in respect of negotiable instruments, unless the contrary is proved.

That every negotiable instrument was made, drawn, accepted, endorsed or transferred for consideration.

2. That every negotiable instrument hearing a date was made or drawn on such date.

3. That every bill of exchange was accepted within a reasonable time after its date and before its maturity.

4. That every transfer of a negotiable instrument was made before its maturity.

5. That the endorsements appearing upon a which they appear thereon.

6. That a lost negotiable instrument was duly stamped.

7. That the holder of negotiable instrumentis is a holder in due course, but this presumption would not arise where it is proved that the holder has obtained the instrument from its lawful owner, or from any person in lawful custody thereof, by means of an offence fraud or for unlawful consideration and in such a case the holder has to prove that he is a holder in due course.

Q.3. Write a short note on modes of crossing. (2014)

Or What is meant by the term ‘Crossing a cheque’?

Ans. Crossing a Cheque: A cheque is said to be crossed when two parallel transverse lines, with or without any words, are drawn on the left hand top corner of the cheque. It is relevant to state that such lines are essential for ‘general crossing’ and may not be drawn in case of special crossing.

Crossing of a cheque does not affect its negotiability. A crossed cheque can be negotiated in the same way as uncrossed one, i.e. it can be negotiated by mere delivery in case it is payable to bearer and by endorsement and delivery if it is payable to order.

Types or Modes of Crossing: There are three types or modes of crossing:

1. General Crossing: Where a cheque bears across its face (usually on the left hand top corner) two parallel transverse lines without any words or with words ‘and company’ or/and ‘not negotiable’ written in between these two parallel lines, it is called general crossing. Thus, general crossing may take any of the following forms:

2. Special Crossing: Where a cheque bears across its face (transverse lines are not compulsory) an addition of the name of a banker, either with or without the words ‘not negotiable’ that addition shall be deemed a crossing, and the cheque shall be deemed to be crossed specially, and to be crossed to that banker. Thus, special crossing may take any of the following forms:

Where a cheque is crossed specially, the banker on whom it is drawn shall not pay it otherwise than to the banker to whom it is crossed, or his agent for collection.

A special crossing makes the cheque more safe than a general crossing because now a thief will have to search an account-holder of that particular bank only whose name appears in the crossing which may create more difficulty.

3. Restrictive Crossing or Account Payee: To give still more protection to the payee of a cheque the practice of restrictive crossing is also prevalent in the business community Such  crossing can be made in both the cases of ‘general’ as well as ‘special’ crossing by adding the words ‘Account payee’ (A/c payee), ‘Account payee only’ (A/c payee only). Thus restrictive crossing may take any of the forms shown here.

Q.4 What are the main differences between a holder and holder in due course? State the privilegesne a ‘holder in due course’ under the ‘Negotiable Instrument Act’.

Or Distinguish between ‘Holder’ and ‘Holder in due course’. Explain the special privileges granted to holder in due course under the Negotiable Instruments Act, 1881.

Ans. Definition and Meaning of Holder: The holder of a promissory note, bill of exchange or cheque means any person, who satisfies the following two conditions:

1. He is entitled in his own name to the possession of negotiable instrument.

2. He is entitled in his own name to receive or recover the amount due thereon from the parties thereto.

Where the note, bill of exchange or cheque is lost or destroyed, its holder is the person who is entitled at the time of such loss or destruction.

In order to be entitled to the instrument in his own name, the holder must be named therein as the payee or the endorsee, in case the instrument is payable to order, or he must be a bearer thereof, in case the instrument is payable to bearer.

A person, who has obtained possession of an instrument by theft or under a forged endorsement, is not a holder, as he is not entitled to recover the instrument. Here, holder implies de jure holder (holder in law) and not be facto holder (holder in fact). An agent holding an instrument for his principal is not a holder, although he may receive its payment.

Definition and Meaning of Holder in Due Course: The ‘holder in due course of a negotiable instrument means any person, who satisfies the following conditions:

1. He became:

(a) the possessor of the negotiable instrument, if payable to bearer; or

(b) the payee or endorsee thereof, if payable to order.

2. He became the holder of the instrument before its maturity.

3. He became the holder of the instrument in good faith, i.e. without sufficient cause to believe that any infirmity in the instrument or defect existed in the title of the person from whom he derived it.

Distinction between Holder and Holder in Due Course: Following are the important points of distinction between a holder and holder in due course:

1. A holder may become the possessor or payee of an instrument even without consideration, whereas a holder in due course, is one who acquires possession for consideration.

2. A holder in due course, as against a holder, must become the possessor or payee of the

instrument before the amount thereon become payable.

3. A holder in due course, as against a holder, must have become the payee of the instrument in good faith, i.e. without having sufficient cause to believe that any defect existed in the transferer’s title.

Privileges of Holder in Due Course: Refer to Sec-B, Q.5.

Q.5. Explain the privileges granted by law to the holder in due course.

Ans. Privileges of Holder in Due Course: A holder in the course enive the fol under the Negotiable Instruments Act:

1. He Gets a Better Title than that of the Transferer: One who is a ‘holder’ only gets no better title than of his transferer but a holder in due course is in a privileged position in that he gets a better than that of the  transferer and the defences in the part of a person liable that the instrument has been obtained by means of an offence of fraud or for an unlawful consideration cannot be pladed against a holder in due couse. [Section 58].

2. Privilege in Case of Inchoate Stamped Instruments [Section 20]: In this case of inchoate stamped instrument, if the holder or original payee fills more amount than that was authorised, he cannot enforce the instrument for the whole amount. If such an instrument is transferred to a holder in due course, he can claim the whole of the amount so entered provided that the amount is covered by the stamp affixed thereon. Thus, the defence that the amount filled by the holder was in excess of the authority given cannot be taken against a holder in due course.

3. Liability of the prior Parties: All prior parties to a negotiable instrument continue to remain liable to a holder in due course both jointly and severally. Whereas, only preceding party is liable to a succeeding party, if the succeeding part is only a holder.

4. Privilege in Case of Fictitious Bills [Section 42]: When a bill of exchange is drawn in a fictitious name and is made payable to the drawer’s order, the bill is said to be a fictitious bell. Such a bill is not a goods bill and cannot be enforcedat law. But the acceptor of such a bill is liable to a holder in due course providedthe latter can sow that the first endorsement on the bill and the signature of the supposeddrawer are in the same handwriting.

5. Privilege when and instrument Delivered Conditionally is Negotiated: When a negotiable instrument is endorsed or delivered conditionally or for a special purpose only, and not with the idea of transferring absolute proverty therein, the property in the instrument does not pass to the endorsee, and he is entirely a bailee with limited title and power of negotiating it. Thus, however, does not affect the rights of a holder in the course, i.e. if such an instrument is negotiated to a holder in due course, the parties liable on the instrument cannot escape liability [Sections 46 and 47].

6. Estopped Against Denying Original Validity of Instrument [Section 120]: The plea of original invalidity of the instrument, e.g, that no consideration actually passed between the maker and the payee of a promissory note, cannot be put forth against the holder in due course by the drawer of a bill of exchange or cheque or by the maker of a promissory note or by an acceptor of a bill for the honour of the drawer. However, the aforestated parties are not precluded from challenging the validity of the instrument on the ground that at the time of making the instrument he was a minor or his signature had been forged or the instrument is otherwise void-ab-initio, e.g. where a promissory note is made. ‘Payable to the bearer’ it is void and illegal as per the Reserve Bank of India Act. 

7. Estopped Against Denying Capacity of Payee to Endorse: ‘No maker of a note and no accepter of a bill payable to order shall, in a suit thereon by a holder in due course, be permitted to deny the payee’s capacity, at the date of the note or the bill to endorse the same’ [Section 121). Thus, a holder in due course can claim payment in his own name despite the payee’s in capacity to endorse the instrument. (2014)

Q.6. Write a short note on ‘Payment in due course.’

Ans. Payment in Due Course: It means payment of the instrument after the expiry of the duration of the instrument in good faith and without any negligence to the possessor thereof and without the may lead a person to believe that the person receiving the payment  is not entitled to it. 

Once the payment in due course has been made then all parties liable on the instrument are relieved of their liability thereon, even if it is subsequently found that the payment has been made to a wrong person. 

The following conditions must be satisfied in order for a payment to qualify as a payment in due course: 

  1. Payment must be in accordance with the apparent tenure of the instrument. Payment should be made after the date of maturity otherwise it is not a payment in due course and hence, the parties liable thereon are not relieved of their liability.

2. Payment must be made to the person in possession of the instrument and who is entitled to receive the payment thereof. If an instrument is payable to order and there is no endorsement on it then payment to any person is possession of the instrument will not qualify as payment in due course. 

3. Payment must be made in good faith and without negligence. If the payment has been made in good faith but the payee is guilty of negligence while making the payment, such a payment will not qualify as payment in due course.

4. Payment must be Made under Bonafide Circumstances: The payment of the negotiable instrument should be made to the person in possession and in such a case, that no cause existe to doubt that the person receiving the payment is not entitled to it. If the payment is made such that it is considered as a payment in due course even if the person in possession of the instrument is not actually entitled to it. If the payer does not make adequate enquiries before making the payment, when the circumstances exist to doubt the title of the possessor of the instrument, then such a payment is not deemed to be a payment in due course.

Q.7. What do you understand by ‘Endorsement’? Explain different types of endorsements. What are the general principles governing the endorsement? 

Or Write a note on endorsement. (2014)

Or Explain the kinds/types of endorsement.

Ans. Endorsement: Where the maker or holder of a negotiable instrument signs the same otherwise than as such maker for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto (called Allonge), or so, signs for the same purpose, a stamped paper intended to be completed as a negotiable instrument, he is said to endorse the same and the person to whom the instrument is endorsed is called the endorsee. 

In other words, ‘endorsement’ involves the writing of something on the back of an instrument for the purpose of transferring the right, title and interest therein to some other person.

Types/kinds of Endorsement 

An endorsement may be: 

1. Blank or General: An endorsement is said to be blank or general where the endorser namely writes his signature on the back of the instrument, and the instrument so endorsed becomes payable to bearer, even though originally it was payable to order. Thus, where bill is payable to ‘Mohan or Order’, and he writes on its back ‘Mohan’, it is an endorsement in blank by Mohan and the property in the bill can pass by mere delivery, as long as the endorsement continues to be a blank. But a holder of an instrument endorsed in blank may convert the endorsement in blank into an endorsement in full, by writing above the endorser’s signature, a direction to pay the instrument to another person or his order. 

2. Special or Full: If the endorser signs his name and adds a direction to pay the amount mentioned in the instrument to, or to the order of a specified person, the endorsement is said to be special or in full. A bill made payable to Mohan, and endorsed ‘pay to the order of Sohan’ would be specially endorsed and Sohan endorses it further. A blank endorsement can be turned into a special one by the addition of an order making the bill payable to the transferee. 

3. Restrictive: An endorsement is restrictive which prohibits or restricts the further negotiation of an instrument. 

4. Partial: A partial endorsement is one which purports to transfer to the endorsee a part only of the amount payable on the instrument. A partial endorsement does not operate as negotiation of the instrument. A holds a bill for 1000 and endorses it as ‘Pay B or order 500’, the endorsement is partial and invalid. 

5. Conditional or Qualified: An endorsement is conditional or qualified when it limits or negates the liability of the endorser. An endorser may limit his liability in any of the following ways: 

(a) By sans recourse endorsement, i.e. by making it clear that he does not incur the liability of an endorse to the endorsee or subsequent holders and they should not look to him in case of dishonour of instrument. The endorser excludes his liability by adding the words ‘sans recourse’ or ‘without recourse’, e.g. “pay A or order sans recourse’. 

(b) By making his liability depending upon the happening of a specified event which may never happen, e.g. the holder of a bill may endorse it thus ‘pay A or order on his marrying B’. In such a case, the endorser will not be liable until A marries B. 

Principles Governing the Endorsement

Following are the principles governing the endorsement:

1. Maximum Disclosure: Freedom of Information legislation should be guided by the principle o maximum disclosure. The principle of maximum disclosure establishes a presumption that all information held by public bodies should be subject to disclosure and that this presumption may be overcome only in very limited circumstances.

2. Obligation to Publish: Public bodies should be under an obligation to publish key information freedom of information implies not only that public bodies accede to requests for information but also that they publish and disseminate widely the documents of significant public interest, subject only to reasonable limits based on resources and capacity.

3. Promotion of Open Government: Public bodies must actively promote open government. Informing the public of their rights and promoting a culture of openness within government are essential if the goals of freedom of information legislation are to be realised. 

4. Limited Scope of Exceptions: Exceptions should be clearly and narrowly drawn and subject to strict ‘harm’ and ‘public interest tests. All individual requests for information from public bodies should be met unless the public body can show that the information falls within the scope of the limited regime of exceptions. 

5. Processes to Facilitate Access: Requests for information should be processed rapidly and fairly and an independent review of any refusals should be available. A process for deciding upon requests for information should be specified at three different levels: within the public body; appeals to an dent administrative body; and appeals to the courts.

6. Costs: Individuals should not be deterred from making requests for information by excessive costs. The cost of gaining access to information held by public bodies should not be so high as to deter potential applicants, given that the whole rationale behind freedom of information laws is to promote open access to information. 

7. Open Meetings: Meetings of public bodies should be open to the public freedom of information that includes the public’s right to know what the government is doing on its behalf and to participate in decision-making processes. 

8. Disclosure Takes Precedence: Laws which are inconsistent with the principle of maximum disclosure should be amended or repealed. The law on freedom of information should require that other legislation be interpreted, as far as possible, in a manner consistent with its provisions. 

9. Protection for Whistleblowers: Individuals who release information on wrongdoing whistleblowers must be protected. Individuals should be protected from any legal, administrative or employment-related sanctions for releasing information on wrongdoing. 

Q.8. Explain the rules regarding the negotiation of: 

1. A lost instrument. 

2. A stolen instrument.

Ans 1 A Lost Instrument: The following rules are applicable in the case of lost instrument: 

(a) Where a bill of exchange has been lost before it is overdue, the person who was its holder may us to the drawer to give him another bill of the same tenor. The drawer may require the holder to give security to indemnity him against all persons whatever in case the bill alleged to heen lost shall be found again. If the drawer on request as aforesaid refuses to give such hill he may be compelled to do so by means of a suit (Section 45 (A)]. The right to in a duplicate of lost instrument is given to the holder of a promissory note or a cheque also. 

(b) To avoid the risks involved in case of loss of negotiable instrument, its holder should inform all parties liable on it and should also give public notice by advertisement in some local newspaper

(C) If the holder could not obtain a duplicate copy, he should on maturity make an application to the person liable to pay on the lost instrument for payment of the amount due therein. Although the payer is entitled to refuse payment of the instrument delivered to him, he may make the payment after getting a written undertaking from the payee to indemnify him against any further claim thereon. In case the payer insists on delivery of the instrument and refuses to pay otherwise then payment can be obtained through court on similar undertaking to indemnify [Section 811. (d) The finder of the lost instrument gets no title to it and cannot sue the party liable thereon for its payment. The rightful holder is entitled to get back the instrument from him. But if the finder obtains payment of the instrument in his possession it being a bearer document the payer will be discharged from his liability if he makes a payment in due course. The true 

owner, however, will be entitled to recover the amount from the finder Sections 58 and 821. (e) Although the finder of the lost instrument, in the absence of title to it, cannot lawfully transfer it, but if he negotiates it, being a bearer instrument or one endorsed in blank, to a holder in due course, such holder gets a good title to it and can obtain payment from the party concerned [Section 58). The time owner cannot take possession of the same from such a holder in due course, of course he can claim damages from the finder, if traceable.

(f) In case of the finder transfers or order instrument by making a forged endorsement, even a bonafide transferee for value gets no legal title to it and therefore he is not entitled to sue on the instrument. Forgery can confer no title and thus endorsee is not a holder in due course. If the party liable to pay on the instrument makes the payment to the endorsee who holds it under forged endorsement, he shall continue to be liable to the true owner.

2. A Stolen Instrument: The position in case of a stolen negotiable instrument is almost the same as in the case of a lost instrument, with the difference that on being traced the brief is open to criminal prosecution while a finder is not. Here also, the thief does not acquire any title to the instrument and the true owner can sue him for the recovery of the instrument or the money if he has received it from the maker, acceptor to drawer. But if the thief transfers a bearer instrument to a holder in due course, such a holder gets a good title to it. [Section 58] 

Q.9. Discuss the rules regarding ‘Presentment for acceptance’ of negotiable instrument. State the circumstances under which such presentment is excused. 

Ans. Presentment for Acceptance: ‘Presentment for acceptance’ is necessary in case of bills of exchange only. But it is not every bill which has to be presented for acceptance. A bill of exchange ‘payable on demand’ or ‘payable on the expiry of certain period after date’ or payable on the date of happening of an event which is certain to happen’ need not be presented for acceptance and it becomes due for payment even otherwise, 

The following bills, however, must be presented for acceptance in order to charge the parties with liability: 

1. A bill payable at a specified period after sight. Such a bill must be presented to the drawee for sight or acceptance in order to fix the maturity of the bill.

2. A bill in which there is an express stipulation that it shall be presented for acceptance before it is presented for payment.

Rules or Circumstances Regarding Presentment for Acceptance 

The rules with regard to presentment for acceptance are as follows: 

1. Presentment by Whom: Only a ‘holder’ of the bill or his agent can present a bill for acceptance. It means that the drawer himself or the endorsee, if the bill has been negotiated before acceptance or his agent can present the bill for acceptance. 

2. Presentment to Whom? 

A bill can be presented for acceptance to any one of the following:

(a) The drawee of the bill or his duly authorised agent.

(b) All the drawees where there are several drawees.

(c) The legal representative in case the drawee is dead.

(d) The official receiver in case the drawee has become insolvent.

(e) The drawee in case of need.

(f) An acceptor for honour.

3. Time for Presentment: The rules with regard to time of presentment for acceptance are as follows:

(a) The presentation for acceptance must be made on a business day within business hours, whether the parties are traders or non-traders.

(b) Where presentation for acceptance is obligatory, i.e. where the bill is expressed payable at a specified period after sight, the bill must, if no time is specified therein for presentation, be presented within a reasonable time after it is drawn.

(C) Where period of presentment is specified in the bill, it must be presented within that period. 

4. Place of Presentment: If a particular place has been specified in the bill for presentment for acceptance, it must be presented at that place. Ifat such a place the drawee cannot be found on the due date for presentment, after reasonable search, the bill is dishonoured. If no place is mentioned in the bill, it may be presented at the usual place of business of the drawee signifies the assent of the or his residence. 

5. Proof of Presentment: There must be a definite proof of presentment for acceptance and the drawee’s refusal for the same. In order to declare ‘dishonour by non-acceptance the holder must prove before the notary public with the help of witnesses that the bill was in fact presented to the drawee for his acceptance or that the drawee could not be found after reasonable search, and such proof must be duly recorded by the Notary Public. 

6. Drawee’s Time for Deliberation: The holder must, if so required by the drawee of a bill of exchange presented to him for acceptance, allow the drawee forty-eight (48) hours (exclusive of public holidays) to consider whether he will accept it. 

Q.10. When is a negotiable instrument said to be discharged? What is the difference between discharge of an instrument and discharge of a party to an instrument? 

Ans. The term ‘discharge’ in relation to negotiable instrument has following two connotations: 

1. Discharge of the Instrument: A negotiable instrument is said to be discharged when it becomes completely useless, i.e. no action on that will lie, and it cannot be negotiable further. After a negotiable instrument is discharged the rights against all the parties thereto comes to an end, and no party even a holder in due course, can claim the amount of the instrument from any party thereto.

For example, in the following cases the instrument is deemed to be discharged:

(a) ( When the party primarily liable on the instrument makes the payment in due course to the holder at or after maturity (Section 78). A payment by a party who is secondarily liable does not discharge the instrument because in the case of the payer holds it to enforce it against prior endorsers and the principal debtor. 

(b) When a bill of exchange which has been negotiable is, at or after maturity, held by the acceptor in his own right, the instrument is discharged (Section 90). 

(c) When the party primarily liable becomes insolvent, the instrument is discharged and the holder cannot make any prior party liable thereon. Notice that in the case of insolvency, hacceptor or maker is unable to pay and it is only on refusal to pay that the instrument 

is deemed to be dishonoured and prior parties can be made liable thereon. Similarly instrument stands discharged when the primary party liable is discharged by material alteration in the instrument Section 871, or by lapse of time making the debt time barred under the Limitation Act.

(d) When the holder cancels the instrument with an intention to release the party primarily liable thereon from the liability, the instrument is discharged and ceases to be negotiable.

2. Discharge of One or More Parties: One or more parties to a negotiable instrument are discharged from liability in the following ways: 

(a) By Cancellation Section 82 (a)]: When the holder of a negotiable instrument deliberately cancels the name of any of the party liable on the instrument with an intent to discharge him from liability thereon, such party and all endorsers subsequent to him, who have a right of action against the party whose name is so cancelled, are discharged from liability. 

(b) By Release (Section 82(b)]: If the holder of a negotiable instrument releases any party to the instrument by any method other than cancellation of names, the party so released and all parties subsequent to him, who have a right of action against the party so released, are discharged from liability 

(C) By Payment Sections 82(c) and 78): When the party primarily liable on the instrument makes the payment in due course to the holder at or after maturity, all the parties to the instrument stand discharged, because the instrument as such is discharged by such payment. 

(d) By Allowing Drawee more than 48 Hours to Accept (Section 83]: If the holder of a bill of exchange allows the drawee more than forty eight hours, exclusive of public holidays, to consider whether he will accept the same, all previous parties not consenting to such allowance are thereby discharged from liability to such folder. 

(e) By Taking Qualified Acceptance [Section 86]: If the holder of a bill agree to a qualified acceptance all prior parties whose consent is not obtained, to such an acceptance are discharged from liability. 

(f) By not Giving Notice of Dishonour: Any party to a negotiable instrument to whom notice of dishonour is not sent by the holder, is discharged from liability as against the holder, unless the circumstances are such that no notice of dishonour is required to be sent. 

(g) By Non-presentment for Acceptance of Bill [Section 61]: When a bill of exchange is payable certain period after sight, its holder must present it for acceptance of the drawee within a reasonable time after it is drawn. If he makes a default in making such presentment the drawer and all endorsers who were liable towards such a holder are discharged from their liability towards him. 

(h) By Delay in Presenting Cheque (Section 84]: It is the duty of the holder of a cheque to present it for payment within reasonable time of its issue. If he fails to do so and in the mean while the bank fails causing damage to be drawer, the drawer is discharged as against the holder to the extent of the actual damage suffered by him. 

(i) By Material Alteration: Any material alteration of a negotiable instrument renders the same work, i.e. discharges the instrument itself, and all parties thereto at the time of making such alteration and not consenting to the change are discharged from liability thereon [Section 87). But persons who become parties to the instrument after the alteration are liable under the instrument as altered. In other words, those who take an altered instrument cannot complain [Section 88]. 

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