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

Under Section 84, when a cheque is not presented within a reasonable time and the drawer, who had funds, suffers actual damage through the delay, what is the effect?

The drawer is discharged only to the extent of the actual damage suffered through the delay in presentment, and the holder becomes a creditor of the banker to that extent in place of the drawer. There is no discharge where no actual damage occurs.

  1. AThe drawer is discharged to the extent of the actual damage, and the holder becomes a creditor of the banker to that extentCorrect
  2. BThe drawer is wholly discharged regardless of any damage
  3. CThe drawer remains fully liable and the holder has no claim on the banker
  4. DThe cheque becomes void and the holder loses all rights

Explanation

Section 84 discharges the drawer only to the extent of actual damage caused by the delay. The holder then stands as creditor of the banker, in place of the drawer, to that extent. Full discharge without damage is incorrect, as the section's illustration (b) shows.

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