2. A document/ instrument that creates a
right in favour of some person
 A document guaranteeing the payment
of a specific amount of money, either on
demand, or at a set time
 Types

› Promissory Note
› Bill of Exchange
› Cheque

3. 

An instrument wherein one party (the maker or
issuer) makes an unconditional promise in
writing to pay a determinate sum of money to
the other (the payee), either at a fixed or
determinable future time or on demand of the
payee under specific terms
A written, dated and signed two-party
instrument containing an unconditional
promise by the maker to pay a definite sum of
money to a payee on demand or at a
specified future date

4. A written order by the Drawer to the
Drawee to pay money to the Payee
 A written order used primarily in
international trade that binds one party to
pay a fixed sum of money to another party
at a pre-determined future date
 An unconditional order issued by a person
or business which directs the recipient to
pay a fixed sum of money to a third party at
a future date. It must be in writing and
signed and dated. Also known as Draft


5. A cheque is a negotiable instrument
instructing a financial institution to pay a
specific amount of a specific currency from
a specified transactional account held in
the drawer’s name with that institution. Both
the drawer and the payee may be natural
persons or legal entities
 A bill of exchange drawn on a bank by the
holder of an account; payable into a bank
account if crossed, or on demand if
uncrossed


6. Bearer
Cheque - When the words "or bearer" appearing on the face of
the cheque are not cancelled. Payable to the person specified therein
or to any other who presents it to the bank for payment. Such cheques
are risky as if lost, the finder of the cheque can collect
Order
Cheque - When the word "bearer" appearing on the face of a
cheque is cancelled and when in its place the word "or order" is written
on the face of the cheque. Payable to the person specified therein as
the payee, or to any one else to whom it is endorsed (transferred).
Uncrossed
/ Open Cheque - When a cheque is not crossed. The
payment of such a cheque can be obtained at the counter of the
bank. An open cheque may be a bearer cheque or an order one.
Crossed
Cheque - Crossing of cheque means drawing two parallel
lines on the face of the cheque with or without additional words like "&
CO." or "Account Payee" or "Not Negotiable". A crossed cheque cannot
be encashed at the cash counter of a bank but it can only be credited
to the payee's account.

7. Anti-Dated
Cheque - If a cheque bears a date
earlier than the date on which it is presented to the
bank. Such a cheque is valid upto six months from
the date of the cheque.
Post-Dated
Cheque - If a cheque bears a date
which is yet to come (future date). A post dated
cheque cannot be honored earlier than the date
on the cheque.
Stale
Cheque - If a cheque is presented for
payment after six months from the date of the
cheque it is called stale cheque. A stale cheque is
not honored by the bank.

8. Must be in writing
 Amount/ date/ time/ name/ stamp - must
be mentioned
 Free transfer
 Rights of the holder

› To recover money himself
› To transfer his right to another person
Unconditional promise/ order to pay
 Exception to the rule “No one can transfer
the better title than he himself has”
