- A bona fide holder acquires a defect-free title
- Right to sue on it in his own names
- Right to negotiate the bill unless the lost endorsement is restrictive.
- It is the duty of the drawer to present the bill to the drawee for acceptance
- It is the duty of the payee to represent the bill to the acceptor for payment.
- In the event of the dishonour of a bill, it is the duty of the payee: –
- To notify the party the fact of dishonour
- To have the bill noted and or protested
Presentation of a bill for payment
On maturity of a bill, it must be presented to the acceptor for payment. Its presentation is governed by the following rules: –
- If payable on demand, it must be presented within a reasonable time of acceptance or negotiation.
- If payable in future, it must be presented on the date it falls due or within three days of grace.
- It may be presented by the payee or his agent.
- It must be presented to the acceptor at the agreed place i.e. his place of business or residence.
- It must be presented to the acceptor, however, if dead to his personal representative.
- If the acceptor has been declared bankrupt it must be presented to him or his trustee in bankruptcy
- It must be presented at a reasonable hour on a business day
- If trade custom or usage permits, presentation may be effected by post.
If on presentation, the amount is paid by or on behalf of the acceptor, the bill is discharged.
However, presentation for payment maybe dispensed with if it is impossible to secure the same even with exercise of reasonable diligence. If the acceptor cannot be found or payment is refused the bill is said to be dishonoured.
A bill is said to be dishonoured if:-
- Presentation for payment is exercised by law
- Payment is refused.
It is the duty of the payee to notify the party liable the fact of the dishonour and to have it noted and or protested.
Rules relating to notice of dishonor
- The notice may be given by or on behalf of the payee
- It may be given in the agent’s or the payee’s name
- The notice may be oral or written
- If written it need not signed
- It must be given within a reasonable time of the dishonour
- Return of the dishonoured bill is sufficient notice.
- It must be given at a reasonable time on a business day.
- If effected by post it is effective when the letter is posted.
Once a bill is dishonoured, the payee must present it to notaries public who re-presents it to the acceptor for payment and if payment is refused, the notaries public indicates the date on the bill and later specifies the dishonour in his register by entering the words used by the acceptor in the refusal. This is referred to as Noting the Bill.
Protesting a bill
This is the formal declaration by notaries public attesting the fact of dishonour of a bill. It is conclusive evidence of the dishonour. A protest note must disclose and contain: –
- The person for and against whom it is made
- Reason for the protest
- Date and Place of the protest
- Particulars of the notaries public
The dishonoured bill or a copy thereof must be attached.
A bill of exchange is said to be discharged when all rights on it are extinguished.
However, a party may still be held liable on it depending on the method of discharge.
A bill may be discharged in any of the following ways: –
- Payment in due course: If the bill is paid by or on behalf of the acceptor at or after maturity, it is discharged and parties freed.
- Acceptor – holder Maturity (Merger): If the acceptor of a bill becomes the payee of right, at or after maturity, the bill is discharged.
- Renunciation or waiver: Under Section62 (1) of the Act, if the holder of a bill at or after maturity unconditionally and absolutely renounces his right against the acceptor, the bill is discharged. The renunciation must be written and the bill must be returned to the acceptor.
- Cancellation: Under Section 63 (1) of the Act, if a bill is intentionally cancelled by the payee or his agent, and the cancellation is apparent thereon, the bill is discharged. An unintentional cancellation does not discharge a bill.
- Material Alteration: Under Section 64(1) of the Act, a material alteration on a bill discharges all the parties not privy to the alteration. Under Section 64 (2) a material alteration comprises a change in amount payable, time of payment, date and place of payment.
- Non-presentation: Under Section 45(1) of the Act, the non-presentation of a bill for payment as prescribed by law discharges the drawer and endorsers.