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CMA Intermediate · Business Laws and Ethics · Negotiable Instruments Act, 1881

Under Section 118 of the Negotiable Instruments Act, 1881, which of the following is presumed until the contrary is proved?

Section 118 presumes, until the contrary is proved, that every negotiable instrument was made or drawn for consideration, and that every acceptance, indorsement or transfer was also for consideration. The Section does not presume capacity, market value paid or presentment.

  1. AThat every negotiable instrument was made or drawn for considerationCorrect
  2. BThat every negotiable instrument was made only by a person competent to contract
  3. CThat every holder has paid full market value for the instrument
  4. DThat every instrument was duly presented for payment on the due date

Explanation

Section 118(a) presumes that every negotiable instrument was made or drawn for consideration, and that each acceptance, indorsement, negotiation or transfer was for consideration. The Section contains no presumption about competence, market value or presentment, so the other options are wrong.

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