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CHAPTER II OF NOTES, BILLSAND CHEQUES

Section 5: “Bill of exchange.”

The Negotiable Instruments Act, 1881

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.

A promise or order to pay is not “conditional”, within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified even which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.

The sum payble may be “certain”, within the meaning of this section and section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an instalment, the balance unpaid shall become due.

The person to whom it is clear that the direction is given or that payment is to be made may be a “certain person”, within the meaning of this section and section 4, although he is mis-named or designated by description only.

Questions on this section

2 questions in 5 of our papers cite Section 5. Try these from the free papers:

  1. 1. X draws an instrument directing Y to pay Z Rs. 10,000 "thirty days after the death of M". Y contends that the order is conditional because no one knows when M will die. Under Section 5 of the Negotiable Instruments Act, 1881, is the order conditional?

  2. 2. Consider the following statements with reference to Section 5 of the Negotiable Instruments Act, 1881: 1. The sum payable may be "certain" although it includes future interest. 2. The sum payable may be "certain" although it is payable according to the course of exchange. 3. A person who is mis-named in the instrument cannot be a "certain person" within the meaning of the section. 4. A provision that on default of payment of an instalment the unpaid balance shall become due makes the order conditional. Which of the statements given above is/are correct?

Practise questions on Negotiable Instruments Act, 1881