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CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

A bill of exchange is dated 5 March, bears three indorsements and was later lost. Holder Meera produces a copy and claims on it. Until the contrary is proved, which presumption is NOT made under Section 118?

The presumption that the holder's title can never be questioned even where obtained by fraud is not made. Section 118 presumptions about date, consideration, order of indorsements and stamp on a lost bill apply only until the contrary is proved.

  1. AThe bill was made on 5 March
  2. BThe indorsements were made in the order in which they appear
  3. CThe lost bill was duly stamped
  4. DThe bill was made for consideration, so the holder's title can never be questioned even where it was obtained by fraudCorrect

Explanation

Section 118 presumes consideration, date, order of indorsements and that a lost instrument was duly stamped. These presumptions are rebuttable ('until the contrary is proved'). The presumption that the holder is a holder in due course shifts the burden if the instrument was obtained by offence, fraud or unlawful consideration, so title can be questioned.

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