Essay on the Dishonor of negotiable Instruments

Presentment of a negotiable instrument means presenting or showing a negotiable instrument to the drawee, maker or acceptor. This presentment may be (i) for acceptance, (ii) for sight or, (iii) for payment.

Presentment of acceptance:

Only certain types of bills of exchange require presentment for acceptance. The following bills must be presented for acceptance.

(i) A bill payable after sight or after presentment must be presented for acceptance so that date of maturity of the bill may be fixed.

(ii) A bill in which it has been expressly stipulated that it shall be presented for acceptance before payment.

However, a bill payable (a) on demand, or (b) on a fixed day, or (c) a certain number of days after date need not be presented for acceptance. Even in case where presentment for acceptance is optional, it is advisable to present the bill for acceptance so as to get (i) the benefit of additional security of drawee’s name on the bill, (ii) and immediate cause of action against the drawee for dishonour by non- acceptance.

Essential rules of valid acceptance are:

1. Acceptance must be given on the bill:

No specific form is prescribed. However, the acceptance must be given on the bill and it should not be on any other paper. In case the bill is drawn in sets, only one of the copies should be accepted. If the acceptor signs on all the parts, he will be liable to holder in due course as if each part were a separate bill.

2. Acceptance must be signed by the drawee or by his agent, duly authorized in this respect. Signing on the bill by the drawee, or his duly authorized agent is essential to charge him as a party to the bill. The world “accepted” may or may not be used but signature must be there. Merely writing the word “accepted” without drawee’s signature is not enough.

3. Acceptance must be completed by delivering the instrument to the holder:

Acceptance is complete only when the accepted bill is delivered to the holder.

4. Presentment must be made in time:

Presentment for acceptance must be made at a reasonable time on a business day and before maturity.

5. Not more than 48 hours should be given to accept the bill:

Not more than 48 hours should be allowed to the drawee to consider whether or not he will accept the bill.

To whom Presentment for Acceptance is made?

Obviously, to the drawee. However, presentment for acceptance may be made to the following:

(i) To the drawee himself or his duly authorized agent.

(ii) To his legal representative, if the drawee, before acceptance, has died.

(iii) To his Official Receiver or Assignee if the drawee, before acceptance, has been declared insolvent (Sec.75).

(iv) To drawee in case of need (Sec. 33).

(v) To acceptor for honour (Sec. 108).

(vi) To all the drawees, in case there are more drawees and they are not partners. In case they are partners, to any of the drawees (Sec. 34).

It should be noted that a partner or an agent can accept a bill on behalf of others only when he has express or implied authority to accept the bills.