"Negotiable Instrument" means a piece of paper in writing entitling a right to the holder, a certain sum of money. It is a piece of paper which contains some value and is transferable by simple delivery or sometimes by endorsement and delivery.   (See... characteristics of Negotiable Instruments  )

      Section 30 to Section 32 and Section 35 to 42 of the Negotiable Instruments Act deal with the liability of  parties to Negotiable Instruments.

Liabilities of parties to Negotiable Instruments are as follows :

1. Liability of Drawer

2 Liability of Drawee of Cheque

3 Liability of endorse

4 Liability of Makers of note and  acceptor of bill

5.Liability of Prior Parties to a holder in due course


1. Liability of Drawer:

           According to Section 30 of the Negotiable Instrument Act 1881, The drawer of a bill of exchange or cheque is bound in case of dishonor by the drawee or acceptor thereof, to compensate the holder, provided due notice of dishonor has been given to, or received by, the drawer .

2 Liability of Drawee of Cheque

           The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required so to do, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default (Section 31 of the Negotiable Instrument Act 1881)

Liability of Makers of note and  acceptor of bill :

           The maker of a promissory note and the acceptor before maturity of a bill of exchange are bound to pay the amount thereof at maturity according to the apparent tenor of the note or acceptance respectively, and the acceptor of a bill of exchange at or after maturity is bound to pay the amount thereof to the holder on demand. In default of such payment as aforesaid, such maker or acceptor is bound to compensate any party to the note or bill for any loss or damage sustained by him and caused by such default.(Section 32 of the Negotiable Instrument Act 1881)

Liability of endorse :  

            Liability of endorser In the absence of a contract to the contrary, whoever endorses and delivers a negotiable instrument before maturity, without, in such endorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonor by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonor, provided due notice of dishonor has been given to, or received by, such endorser as hereinafter provided. Every endorser after dishonor is liable as upon an instrument payable on demand.(Section 35 of the Negotiable Instrument Act 1881)


5.Liability of Prior Parties to a holder in due course 

             Every prior party to a negotiable instrument is liable thereon to a holder in due course until the instrument is duly satisfied.(Section 36 of the Negotiable Instrument Act 1881)

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