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When a negotiable instrument states no interest rate, what annual rate does section 80 of the…

Section 80 of the Negotiable Instruments Act, 1881 prescribes 18% per annum when the instrument states no interest rate. Interest ordinarily starts on the date the amount…

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When a negotiable instrument states no interest rate, what annual rate does section 80 of the Negotiable Instruments Act, 1881 prescribe for calculating interest on the amount due?

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Answer and explanation

Correct answer D

Section 80 of the Negotiable Instruments Act, 1881 prescribes 18% per annum when the instrument states no interest rate.

Interest ordinarily starts on the date the amount should have been paid. The calculation runs until tender or realization, or until the date after suit that the court directs.

An indorser charged on dishonour by non-payment owes interest only from receipt of notice of dishonour.

Option feedback

Option A

Section 80 fixes the rate at 18% per annum.

Option B

The 9% figure has no basis in section 80.

Option C

The 12% figure has no basis in section 80.

Option D

The calculation uses 18% per annum when the instrument states no rate.

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