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

Which of the following is an example of an ambiguous instrument contemplated by Section 17 of the Negotiable Instruments Act, 1881?

An instrument whose wording allows it to be read either as a promissory note or as a bill of exchange is ambiguous under Section 17. The holder may elect which to treat it as. Clearly worded notes, accepted bills or crossed cheques raise no such doubt.

  1. AA cheque crossed generally and marked 'not negotiable'
  2. BA bill of exchange duly accepted by the drawee
  3. CA written order whose wording allows it to be read as either a promissory note or a bill of exchangeCorrect
  4. DA promissory note payable to bearer on demand

Explanation

Section 17 deals with an instrument that can be construed either as a promissory note or a bill of exchange, so the holder may choose how to treat it. The other options are clear instruments with no doubt about their character.

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