CMA Foundation · Fundamentals of Financial and Cost Accounting · Bills of Exchange
Which feature is essential for a valid bill of exchange under the Negotiable Instruments Act, 1881 as taught at Foundation level?
A valid bill of exchange must contain an unconditional order to pay a certain sum of money. It also needs to be in writing and signed by the drawer. Security, a bank as drawee, or payment on demand only are not essential requirements.
- AIt must contain an unconditional order to pay a certain sum of moneyCorrect
- BIt must be backed by security of goods
- CIt must be drawn only on a bank
- DIt must always be payable on demand
Explanation
A bill must be in writing, contain an unconditional order to pay a certain sum, be signed by the drawer and be accepted by the drawee. It need not be secured, can be drawn on any person, and can be payable after a period. Hence the unconditional order is the essential feature.
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