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

Which of the following is a presumption that Section 118 of the Negotiable Instruments Act, 1881 makes until the contrary is proved?

Section 118 presumes, until the contrary is proved, that every negotiable instrument was made or drawn for consideration. The same presumption covers acceptance, indorsement and transfer. The section has no presumption that a cheque was crossed or that the holder is the original payee.

  1. AEvery negotiable instrument was made or drawn for considerationCorrect
  2. BEvery cheque was duly crossed before delivery
  3. CEvery holder of an instrument is the original payee
  4. DEvery indorsement was made on the date of the instrument

Explanation

Section 118(a) presumes that every negotiable instrument was made or drawn for consideration, and that each acceptance, indorsement or transfer was also for consideration. Section 118 contains no presumption about crossing or about the holder being the payee. Its presumption on order of indorsements concerns sequence, not date.

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