What is Dishonour of Negotiable Instruments?
The inability or unwillingness of the person required to make payment to honour a negotiable document, such as a promissory note or cheque, is known as the Dishonour of Negotiable Instruments. A stop-payment order, inadequate cash, or a mismatch between the terms of the agreement and the instrument are some of the potential causes of Dishonour of Negotiable Instruments. Dishonoured negotiable instruments usually result in specific legal penalties and processes, based on the jurisdiction and type of instrument.
Objectives of the Dishonour of Negotiable Instruments:
1. Determining Non-Performance: The main goal is to identify situations in which the principally accountable party does not fulfil their payment obligation as stipulated in the negotiable instrument.
2. Legal Recourse: The ability to recognize dishonour empowers parties to take proper legal action against the party in default, including filing a lawsuit to recover the unpaid sum.
3. Protection of Holder’s Interests: By clearly outlining the holder’s rights and remedies in the event of dishonour, it attempts to protect their interests and lower their chance of suffering financial loss.
4. Preservation of Credibility: Parties mitigate reputational risks by upholding their credibility and maintaining confidence within commercial relationships by resolving dishonoured instruments and taking relevant actions.
Difference between Dishonour and Discharge of Negotiable Instrument
In business transactions, Negotiable Instruments are essential because they offer a simple, portable, and enforceable method of payment, enabling the exchange of goods and services. However, two crucial ideas frequently come to mind in the context of negotiable instruments: Dishonour of Negotiable Instruments and Discharge of Negotiable Instruments. To effectively negotiate the complexities of commercial law, individuals and corporations involved in financial operations must be able to distinguish between these two concepts. In this article, we’ll learn about both of these terms and their differences.
Table of Content
- What is Dishonour of Negotiable Instruments?
- What is Discharge of Negotiable Instruments?
- Difference between Dishonour and Discharge of Negotiable Instrument
- Conclusion
- Frequently Asked Questions (FAQs)