Minor
A minor doesn’t have contractual capacity in contracts for negotiable instruments. If he enters into any agreement, he will not incur any liability. Section 26 mentions that a minor may draw, endorse, deliver, and negotiate a negotiable instrument to bind all parties except himself. However, it is worth noting that the law does not bar minors from getting benefits from the entered agreement. In the case of a negotiable instrument, if a minor is engaged in drawing, making, accepting, or endorsing any instrument, he will not become liable to the holder of the instrument for making any kind of payment.
But the holder of such a negotiable instrument can hold all other parties liable for payment to him except the minor, and the instrument will remain legally binding on all other parties to the contract. Although the minor doesn’t incur liability by accepting a bill of exchange and drawing a promissory note, he can be a payee or endorsee. Thus, it can be concluded that the minor cannot originate a title, but he can serve as a channel between parties to pass it on.
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)