NEGOTIABLE INSTRUMENTS – Bill of Exchange Question and Answer

Question

Highlight six ways in which a bill of exchange might be discharged.

 

Answer

Highlight six ways in which a bill of exchange might be discharged.

i) Payment in due course

Payment in due course means payment made at or after the maturity of the bill to the holder thereof in good faith and without notice that his title to the bill is defective.

ii) When Acceptor becomes holder at maturity (Merger)

When the acceptor becomes the holder of it at or after its maturity, in his own right the bill is discharged.

iii) Express Waive/ Renunciation

A bill is discharged if at or after its maturity the holder expressly and absolutely renounces his rights against the acceptor either in writing or delivering the bill to him.

iv) Cancellation

A bill is discharged an apparent intentional cancellation the holder or his agent.

Cancellation is effective only if it is obvious. Where a bill which has been torn into two pieces and is picked up and mended, a holder in due course who takes it in good faith can enforce it.

v) Material alteration

Where a bill is materially altered without the assent of all parties liable on the bill, the bill is avoided, except as against a party who has him made, authorized or assented to the alteration and subsequent endorsers. If alteration is not apparent a holder in due course may endorse payment of the bill according to his original tenor. Material alteration is an alteration of:-

i) the date of payment

ii) the sum payable

iii) the place of payment and consent of the acceptor

iv) where the bill has been accepted generally, the addition of a place of payment without the consent of the acceptor

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