Skip to content

CSEET · Business Laws and Management · Elements of Law relating to Negotiable Instruments

Ravi, the holder of a bearer instrument, indorses it: "Pay Charu only." Which statement is correct as per Section 50 of the Negotiable Instruments Act, 1881?

The indorsement "Pay Charu only" contains express words of restriction, so Charu does not get the right of further negotiation. Under the illustrations to Section 50, "Pay C only" excludes further negotiation, whereas a plain "Pay C" would not.

  1. ACharu can negotiate it further because every indorsement allows further negotiation
  2. BThe indorsement is void because bearer instruments cannot be indorsed
  3. CThe indorsement excludes Charu's right of further negotiationCorrect
  4. DCharu becomes merely an agent of the drawee

Explanation

The illustrations to Section 50 show that "Pay the contents to C only" excludes the right of further negotiation by C. By contrast, a plain "Pay C" does not exclude it. The words "only" make the restriction express.

Did you get it right without looking?

One question tells you little. A timed set on Elements of Law relating to Negotiable Instruments shows your real accuracy, how long you take and where you lose marks.

Practise Elements of Law relating to Negotiable InstrumentsFree diagnostic mock

More Elements of Law relating to Negotiable Instruments questions