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

A promissory note is made payable to "Gita Rao", with no words prohibiting transfer. Under Section 13, how is it classified?

It is payable to order. An instrument expressed payable to a particular person, without words prohibiting transfer or indicating it is not transferable, is treated as payable to order, so it remains negotiable even without the words 'or order'.

  1. APayable to order, since it is expressed payable to a particular person and has no words prohibiting transferCorrect
  2. BPayable to bearer, since no endorsement is required
  3. CNot a negotiable instrument, because it lacks the words 'or order'
  4. DPayable to order only if Gita Rao endorses it in blank first

Explanation

Explanation (i) to Section 13 states that an instrument expressed to be payable to a particular person, without words prohibiting transfer or showing an intention that it is not transferable, is payable to order. Words 'or order' are therefore not needed. Bearer status arises only if expressly so payable or if the last endorsement is in blank.

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