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

A holder whose bill has been dishonoured wishes to recover the amount due and expenses by drawing a fresh bill on the party liable to compensate him. Which statement is correct under Section 117(e)?

The holder may draw a bill payable at sight or on demand for the amount due plus expenses properly incurred, and it must be accompanied by the dishonoured instrument and the protest, if any. If that bill is dishonoured, compensation is payable as for the original.

  1. AThe bill must be payable after ninety days and need not accompany any document
  2. BThe bill may be payable at sight or on demand and must be accompanied by the dishonoured instrument and the protest, if anyCorrect
  3. CThe bill may be drawn only for the principal amount, excluding expenses
  4. DThe bill, if dishonoured, creates no liability for the party dishonouring it

Explanation

Section 117(e) lets the party entitled to compensation draw a sight or demand bill for the amount due plus expenses properly incurred, accompanied by the dishonoured instrument and protest if any. If this bill is dishonoured, the dishonouring party is liable to compensate in the same manner as for the original bill.

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