A trader is owed money by a customer and owes a supplier. The trader signs a written, unconditional…
Section 5 defines a bill of exchange as a signed written instrument containing an unconditional order to a certain person to pay a certain sum of money to a certain person,…
Choose your answer
A trader is owed money by a customer and owes a supplier. The trader signs a written, unconditional order directing the customer, who is not a banker, to pay a fixed sum to the supplier or the supplier's order. Which instrument does this describe under the Negotiable Instruments Act, 1881?
Answer and explanation
Correct answer C
Section 5 defines a bill of exchange as a signed written instrument containing an unconditional order to a certain person to pay a certain sum of money to a certain person, order or bearer. Here the trader orders the customer to pay the supplier.
Option feedback
Option A
A promissory note is the maker's undertaking to pay, rather than a direction to a third party.
Option B
A cheque must be drawn on a specified banker. The customer here is not a banker.
Option C
The signed writing gives a specified person an unconditional order to pay a fixed sum to a specified payee or order.
Option D
An endorsement is a separate act of signing an instrument for negotiation under the statutory conditions.
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