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CMA Foundation · Fundamentals of Business Laws and Business Communication · Negotiable Instruments Act, 1881

Under Section 5 of the Negotiable Instruments Act, 1881, which feature distinguishes a bill of exchange from a promissory note?

A bill of exchange contains an unconditional order, signed by the maker, directing a certain person to pay a certain sum, whereas a promissory note contains the maker's own undertaking to pay. Both must be in writing and for a certain sum.

  1. AIt contains an unconditional order directing a certain person to pay, rather than a promise by the makerCorrect
  2. BIt must always be payable on demand
  3. CIt need not be in writing
  4. DIt may be made payable only to bearer

Explanation

Section 5 describes a bill as an instrument containing an unconditional order signed by the maker directing a certain person to pay a certain sum. A note instead contains the maker's own promise to pay. A bill must be in writing and may be payable to order or bearer, and time of payment may be specified.

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