Complete information on Liabilities and Rights of Acceptor for Honour

Liabilities :

The position of an acceptor for honour is like that of a surety. As such, his liability is secondary. He is called upon to make the payment of the bill when the drawee has refused to pay and th. jill has been noted or protested for non-payment. The acceptor for honour is liable to all parties subsequent to the party for whose honour he has accepted the bill.

Rights :

On paying the bill he steps into the shoes of the holder and can sue all the prior parties or party for whose honour he accepted the bill.

Presentment for Sight :

A promissory note is not required to be accepted as it is a promise signed by the maker himself. However, a promissory note payable within a specified period after sight is required to be presented for sight. A note payable on demand, or at sight or on a fixed day need not be presented for sight.

The rules regarding presentment for sight are the same as in case of presentment for acceptance discussed above.

Presentment for Payment :

Every negotiable instrument, i.e., promissory note, bill of exchange and cheque must be presented for payment to the maker, acceptor or drawee thereof, respectively, by the holder of the bill or his duly authorized agent. In default of such presentment, the other parties (except maker, acceptor or drawer) are not liable on the bill to the holder.

Where there is an agreement or usage, presentment may be made by means of a registered letter.

Exception:

It should be noted that where a promissory note is payable on demand and is not payable at a specified place, presentment for payment is not necessary to charge the maker of the note.

Rules Regarding presentment for Payment

The rules regarding presentment for payment have been given in Sees. 65 to 77. These are as follows:

Time for Presentment :

1. Presentment for payment must be made during the usual hours of business and in case of a bank, during banking hours (Sec.65).

2. A promissory note, a bill of exchange, made payable after a specified period after date or sight thereof must be presented for payment at maturity (Sec. 66).

3. A promissory note payable by installments must be presented for payment on the third day after the date fixed for non-payment of each installment. Non payment on such presentment is like non-payment of a note at maturity.

4. A cheque must, in order to charge the drawer, be presented at the bank upon which it is drawn before the relation between the drawer and his banker has been altered to the prejudice of the drawer. In other words, cheque must be presented before the bank fails. Where a cheque is not presented for payment within a reasonable time of its issue, and the bank fails, by which the drawer suffers any loss, he (drawer) is discharged to the extent of the loss suffered. However, the holder can prove against the bank for the amount of the cheque (Sec. 84).

Examples:

(a) A draws a cheque for Rs. 1,000 and when the cheque ought to be presented, has funds at the bank to meet it. The bank fails before the cheque is presented. The drawer is discharged but the holder can prove against the bank for the amount of the cheque.

(b) A draws a cheque for Rs. 1,000. The bank fails before the cheque could be presented in ordinary course. A is not discharged for he has not suffered actual damage due to any delay in presenting the cheque.

5. A cheque must, in order to charge any person except the drawer, be presented within a reasonable time after delivery thereof by such person (Sec. 73).

The difference between points 4 and 5 be clearly understood. Under point 4, failure to present the cheque within a reasonable time discharges the drawer, whereas under point 5, failure to present the cheque within a reasonable time discharges the indorser.

6. A negotiable instrument payable on demand must the presented for payment within a reasonable time after it is received by the holder (Sec.74).

Place for Presentment :

1. A promissory note, bill of exchange or cheque made, drawn or accepted payable at a specified place and nowhere else must, in order to charge any party thereto, be presented for payment at that place (Sec. 68).

2. A promissory note or bill of exchange made, drawn or accepted payable at a specified place must, in order to charge the drawer or maker there of, be presented for payment at that place (Sec. 69).

The difference between the two points discussed above should be noted. In the first case, if the bill is not presented for payment, all the parties, including maker of a note or acceptor of a bill, are discharged, whereas in the second case, maker of a note or acceptor of a bill is not discharged due to default in presentment. Other parties, however, are discharged.

3. A promissory note or bill of exchange not made payable at a specified place (also not made payable at a specified place and nowhere else) usual residence of the maker, drawee or acceptor there of, as the case my be (Sec. 70).

4. If the maker, drawee or acceptor of a-negotiable instrument has no known place of business or fixed residence and no place ft specified in the instrument for presentment for acceptance or payment, such presentment may be made to him in person wherever he can be found (Sec.71).

It should be noted that the holder must take reasonable steps to find out the residence of the maker, drawee or acceptor. Inspite of this if he is not able to find out the residence, he may make the presentment in person.

Delay in presentment :

Delay in presentment for acceptance or payment is excluded if the delay is caused by circumstances beyond the control of the holder. The delay should not be because of his default, misconduct or negligence. When the cause of delay is over, presentment must be made within a reasonable time.