Agent
Section 27 of the Negotiable Instrument Act has established that “a person capable of contracting may make, draw, accept indorse, deliver, and negotiate a bill, note, or cheques either by himself or through a duly authorized agent acting on his behalf.” The agent’s main job is to bring a third party into a contractual relationship with his or her principal. As soon as the agent brings another person into a contractual relationship with his or her principal, the role of the agent is over. Therefore, the agent can legally bind his principal through the transactions on a negotiable instrument, but such an act must have been done within the given authority of the principal.
However, it is worth noting that general authority does not authorize the agent or accept an agent to draw a promissory note on behalf of the principal. An authority to draw an instrument does not mean an authority to accept an instrument. Likewise, the authority to accept an instrument does not mean the authority to endorse such instruments. Section 28 of the Negotiable Instrument Act states that “an agent who signs his name on a promissory note, bill of exchange, or cheque without indicating that he signs as an agent is personally liable for the instrument.” The agent is required to make it clear that he is signing as an agent and if this is not followed, he shall be held personally liable for that transaction on an instrument.
Capacity of Parties under Negotiable Instruments Act
A negotiable instrument is a signed document that promises a particular payment to a specified person or holder of the instrument. In India, negotiable instruments are governed under the umbrella of the Negotiable Instruments Act, 1881. This is a significant law that governs all means of negotiable instruments in India. The act establishes a regulatory framework for promissory notes, bills of exchange, and cheques. The act was enacted to provide uniform legal regulations to cover all aspects of negotiable instruments in India. Several times, the act has been amended to make sure that it is in line with changing business practices and new judgments.
According to Section 26 of the Negotiable Instruments Act, 1881, “Every person capable of contracting, according to the law to which he is subject, may bind himself and be bound by the making, drawing, acceptance, endorsement, delivery, and negotiation of a promissory note, bill of exchange, or cheques.” However, a minor may draw or endorse any instrument, and this will bind all parties except himself.
Geeky Takeaways:
- A negotiated instrument is a signed document that promises a particular payment to a specified person or holder of the instrument.
- The Negotiable Instruments Act, 1881 is the governing act to provide a regulatory framework for all types of negotiable instruments.
- It is important to understand the capacity of the parties while making, drawing, accepting, and endorsing any negotiable instrument, as the rights, obligations, and eligibility differ from case to case.
- The capacity to incur liability as a party to a bill has the same scope as in the case of the capacity to contract.
Table of Content
- Capacity of Parties under Negotiable Instruments Act, 1881
- 1. Minor
- 2. Insolvent
- 3. Joint Stock Company
- 4. Agent
- 5. Legal Representative
- Conclusion
- Frequently Asked Questions (FAQs)