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CS Executive · Jurisprudence, Interpretation and General Laws · Law relating to Negotiable Instruments

A bill of exchange is drawn by Meera in Dubai, accepted by Karan payable in Mumbai, and then indorsed to Rohit in Delhi. Absent any contrary contract, whose law regulates the essential liability of Karan as acceptor?

Mumbai law governs Karan's liability. Under Section 134, absent a contrary contract, the acceptor's and indorser's liabilities are regulated in essential matters by the law of the place where the instrument is made payable, while the drawer's liability follows the law of the place of drawing.

  1. AThe law of Dubai, where the bill was drawn
  2. BThe law of Delhi, where it was last indorsed
  3. CThe law of Mumbai, where the bill is made payableCorrect
  4. DThe law of the place where Karan signed the acceptance only if different from the payment place

Explanation

Section 134 states that the maker or drawer's liability is governed by the law of the place where the instrument was made, while the acceptor's and indorser's liabilities are governed by the law of the place where it is made payable. Karan is acceptor and the bill is payable in Mumbai. Dubai law applies to Meera as drawer, not to Karan.

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