Negotiable Instruments - Presentment For Acceptance

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Presentment is a type of demand by which a negotiable instrument’s holder can do something based on the directives of the same. It is a form of showing the instrument to the drawee, maker, or acceptor for acceptance and sight or payment. The Negotiable Instrument Act 1881– presentment for acceptance can help you understand this concept with proper elaboration and discernment. The entire procedure of the presentment of negotiable instrument has been outlined for ease of understanding of presentment for acceptance. 

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After sight, if a bill of exchange is payable and there is no time or place specified for presentment, make sure to be presented to the drawee for further acceptance. After a relevant and reasonable search, if possible, the person who is entitled to the demand acceptance can appear within a reasonable time only after it is drawn. In general, in such a presentment, no parties stand liable to the person making a claim. If the drawee in case of need cannot be found after reasonable search, the bill stands dishonoured. 

Introduction to Presentment for Acceptance

When a bill is directed to a drawee at a particular location, the same must be presented only in that location, however, in terms of the due-date of presentment, if the person fails after reasonable search, the bill is considered as dishonoured. Therefore, the presentment for acceptance is presenting a bill of exchange to the drawee mentioned in the bill. He or she has to come to an agreement to pay the bill at any time in the future. It is an act through which we can understand the notification of holding a bill of exchange for the request of acceptance accompanied by the bill. 

Also, a promissory note is applicable in terms of acceptor for honour. It is payable after a specific period of sight and hence, must be presented to the maker for sight. This is possible only if he or she is found after a reasonable search, by the person who is entitled to the demand payment. Cheques, promissory notes, and bills of exchange must be presented for the payment. 

Acceptance for Honour

When a bill of exchange has been protested or noted for non-acceptance due to various reasons, and on the hand, a person accepts it with supra protest for honor on behalf of the drawer or even a person endorsed, he or she is known as the acceptor for honour. To make it simpler, when a third party like a bank, releases payment for a bill of exchange due to the nonpayment from a buyer (because the buyer refused the acceptance of delivery or simply didn’t want to pay the money), this is known as acceptance for the honour. 

This means when a holder of a particular bill presents the same to a drawee for accepting the bill, and the person denies receiving the bill, it is known as a dishonoured bill, and the drawee in case of need should deal with a protested bill for dishonour. In the same situation, if a third person wishes to accept the bill for honour of the indorser or drawee, he or she becomes the acceptor for the honour.

Presentment for Acceptance

There are only some types of bills of exchange that require the terms of acceptance. A bill is only accepted when the drawee signifies his or her consent with an authorized signature on the instrument over the order of the drawer and wishes to pay the due bills. Under the law of the presentment of negotiable instrument, the drawee in case of need has no liability until the bill is accepted. Therefore, the person has to signify the acceptance by providing a valid signature on the bill. 

The Essentials of Valid Acceptance

  • The drawee should sign the bill through an authorized agent or on his own. The person becomes liable only after the acceptance of the bill and not before it. The prevention of liability is imposed as the person is yet not a party of the instrument. 

  • When a bill is drawn in a set, the acceptance too must be done part wise. If the third person puts the acceptance over one or more parts, he or she becomes liable to all the parts.

  • A bill is treated as dishonoured when the drawee is declared bankrupt or dies. It may also be treated as the same when the drawee is fictitious or can't contract by the bill.

FAQ (Frequently Asked Questions)

Q1. What is the presentment of Negotiable Instruments?

Answer: When a buyer (called drawee) in the process of a negotiable act accepts the bill of exchange provided by the seller, it is known as the presentment of the negotiable instrument. The drawee has to sign on the face of the bill under the words “accepted”. This act illustrates that the drawee is now an acceptor and thus, becomes liable for further payments on or before the maturity date. When a bill becomes payable after sight, the presentment of acceptance is important for fixing the instrument’s maturity.

Q2. Define acceptor for Honour.

Answer: When a bill holder presents the same to a drawee for acceptance, and the person denies it, the bill becomes dishonoured. It is then noted or protested for dishonour. Now, if a third person wants to accept the bill for acceptance on behalf of the drawee or indorser, the person becomes acceptor for the honour. The person, who is willing to accept the bill, must provide in writing on the bill about the declaration of the acceptance under the protest bill to pay the sum on behalf of the drawee.

Q3. What is General and Qualified Acceptance?

Answer: There are different types of acceptance, and among them, general acceptance and qualified acceptance are common. A general acceptance or absolute acceptance is applicable when the drawee accepts the bill, however, without any attachment of condition or qualification. If it is not an absolute acceptance, the holder can regard the bill as dishonoured. 

In terms of qualified acceptance, when a condition is imposed for accepting the presentment, it is called a qualified acceptance. The terms and clauses of qualified acceptance vary on the bill, and thus, the holder has the right to refuse the acceptance of the condition and regards the bill as dishonoured through the terms of non-acceptance.