A bill of exchange is drawn in Germany, accepted payable in France and later indorsed in India. There is no contract to the contrary. The rate of interest is 20% in Germany and 5% in France. Under…
Question and options
A bill of exchange is drawn in Germany, accepted payable in France and later indorsed in India. There is no contract to the contrary. The rate of interest is 20% in Germany and 5% in France. Under section 134 of the Negotiable Instruments Act, 1881, which rate governs the acceptor's liability?
5%, the rate of the place of payment
The higher of the two rates, to protect the holder
20%, the rate of the place where the bill was drawn
The rate in India, where the bill was indorsed
Answer and explanation
Section 134 of the Negotiable Instruments Act, 1881 provides that, absent a contrary contract, the liability of the maker or drawer of a foreign instrument is governed by the law of the place where he made it, while the liabilities of the acceptor and indorser are governed by the law of the place where it is made payable. The German rate would apply to the drawer, not the acceptor.
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