Joint Stock Company
A company is an artificial person in the eyes of the law. Once a company gets the certificate of incorporation, it takes on its own identity and becomes a legal entity. The company can enter into a contract, file a valid lawsuit, and be sued. However, being a separate legal entity, the country has no physical existence, and therefore the company exercises all these rights through its authorized officials and office bearers. It is worth noting that the Memorandum of Association is the supreme document, and all the rights of authorized officials to make a contract are limited by the Memorandum of Association. Although a company cannot incur liability under a negotiable instrument unless expressly or impliedly permitted by its MoA, it can always acquire rights under it.
The authorized official of the company can draw, accept, and endorse negotiable instruments, but within the limits of this document. However, if the authorized official issues a negotiable instrument beyond the scope of authority limited by the memorandum of association, such instrument will be considered void. And even a holder, in due course, cannot make the company liable for such instruments.
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)