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A signed written instrument orders a named drawee, who is not a banker, to pay a fixed sum unconditionally to a named payee thirty days after date. Which instrument is it?

Question and options

A signed written instrument orders a named drawee, who is not a banker, to pay a fixed sum unconditionally to a named payee thirty days after date. Which instrument is it?

  1. Promissory note

  2. Demand draft

  3. Bill of exchange

  4. Cheque

Answer and explanation

Correct answer: C - Bill of exchange

Under section 5 of the Negotiable Instruments Act, 1881 a bill of exchange is a signed instrument containing an unconditional order directing a certain person to pay a certain sum to a certain person or order, or to the bearer. A promissory note under section 4 contains a promise by the maker, not an order. A cheque under section 6, like a demand draft, is drawn on a banker and payable on demand, so neither fits a non-bank drawee and payment after thirty days.

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