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

Ravi Kumar is the payee of a promissory note payable to bearer. He hands it over to Sanjay in return for goods, without signing or endorsing it. Under the Negotiable Instruments Act, 1881, how is the instrument negotiated to Sanjay?

A bearer instrument is negotiated by mere delivery. Since the note is payable to bearer, Ravi's handing it to Sanjay is enough to transfer it. Endorsement is required only for instruments payable to order, and no deed or notarial attestation is needed.

  1. ABy delivery alone, because it is payable to bearerCorrect
  2. BBy endorsement and delivery, because every negotiation needs a signature
  3. CBy registered assignment deed, because it is a promissory note
  4. DBy delivery only if a notary attests the transfer

Explanation

A negotiable instrument payable to bearer is negotiable by delivery alone. Endorsement is needed only when the instrument is payable to order. Ravi's handing over of the note therefore passes title to Sanjay, and no deed or notary is involved.

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