Skip to content

CA Foundation · Business Laws · The Negotiable Instruments Act, 1881

Anil Traders sues Bharat on a promissory note signed by Bharat. Bharat says he received no consideration for it. Anil has produced the note and nothing else. Under the Negotiable Instruments Act, 1881, what is the legal position on consideration?

The court presumes the note was made for consideration, so Bharat must prove that none was given. The Act raises a rebuttable presumption of consideration for every negotiable instrument, and Anil need not prove it first.

  1. AAnil must first prove consideration, as the Act does not presume it
  2. BThe court presumes the note was made for consideration, and Bharat must prove its absenceCorrect
  3. CThe note is void unless consideration is stated on its face
  4. DThe court presumes consideration only if the note is above Rs 5,000

Explanation

The Act presumes that every negotiable instrument was made or drawn for consideration. This is a rebuttable presumption, so the burden of showing no consideration lies on Bharat. Option A reverses the burden of proof.

Did you get it right without looking?

One question tells you little. A timed set on The Negotiable Instruments Act, 1881 shows your real accuracy, how long you take and where you lose marks.

Practise The Negotiable Instruments Act, 1881Free diagnostic mock

More The Negotiable Instruments Act, 1881 questions