Presentation And Notice Of Dishonour
Certain bills must be presented first for acceptance and then for payment, while others only need to be presented for payment.
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Presentation For Acceptance
A bill is duly presented for acceptance which is presented in accordance with the following rules:
- The presentment must be made by or on behalf of the holder to the drawee, or to some person authorized to accept or refuse acceptance on his behalf; at a reasonable hour on a business day, and before the bill is overdue.
- Where a bill is addressed to two or more drawees who are not partners, presentment must be made to them all, unless one has authority to accept for all, in which case presentment may be made to him only.
- Where the drawee is dead, presentment may be made to his personal representative.
- Where the drawee is bankrupt or insolvent, presentment may be made to him or his trustee or to the official assignee.
- Where authorized by agreement or usage, a presentation through the post office is sufficient.
The above presentment will be excused and a bill may be treated as dishonoured by non-acceptance in the following cases:
- Where the drawee is dead, bankrupt or insolvent, or is a fictitious or non-existing person or a person not having the capacity to contract by a bill.
- Where, after the exercise of reasonable diligence, such presentment cannot be effected.
- Where, although the presentation has been irregular, acceptance has been refused on some other ground.
It is important to note that the holder is not excused from the presentation merely because he/she believes that the bill will be dishonoured upon presentation.
Presentation For Payment
Although not all bills must be presented for acceptance, all bills must be presented for payment. The holder is expected to present the bill to the drawee in order for payment of the sum specified on the bill to be made.
It is the duty of the holder to present the bill or other negotiable instrument for acceptance or payment by the drawee. The holder may do so in person, through an authorised representative, or by post.
After the holder has duly fulfilled this requirement of presentation, the drawee is expected to accept the instrument or make the payment. In other words, he/she is expected to honour the promise of the drawer.
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When a bill is drawn on a party, that party (the drawee) is expected to pay the sum specified on the bill to the holder. Where the drawee refuses to make such payment or accept such liability, he/she is said to have dishonoured the instrument. Dishonour may be by non-acceptance or by non-payment.
Dishonour By Non-Acceptance
Where the drawee does not accept the instrument after it has been presented for acceptance by the holder, this is referred to as dishonour by non-acceptance. A non-acceptance may be an outright refusal to accept the instrument or it could be a disqualified acceptance.
A qualified acceptance in which the drawee accepts the bill subject to certain conditions, which could be conditioned as to the time of payment, location of payment, the extent of payment and so on, may be treated as dishonour by non-acceptance.
However, where the holder of the bill accepts such conditions and thus the qualified acceptance, the drawer of the bill is discharged from any liability.
Dishonour By Non-Payment
A bill is dishonoured by non-payment if when it is duly presented for payment; it is refused or cannot be obtained. In the case of a bill not payable on demand, this could be on or before the day the bill falls due, and in the case of a bill payable on demand, within ten days from the time the advice is posted.
A bill is also said to be dishonoured by non-payment when the presentation is excused and the bill is overdue and unpaid.
Notice Of Dishonour
When a bill has been dishonoured either by non-acceptance or by non-payment, a notice of dishonour must be given to the drawer and each endorser, and any drawer or endorser to whom such notice is not given is discharged.
The failure to give notice, however, does not affect the rights of a holder in due course who had obtained it subsequent to the failure to give notice.
Also, where a bill has been dishonoured by non-acceptance and notice has been duly given to that effect, it shall not be necessary to give notice of a subsequent dishonour by non-payment unless the bill has been accepted in the meantime.
This means that non-acceptance would usually translate to non-payment, so notice of non-acceptance to the drawer is as good as a subsequent notice of non-payment.
It is pertinent to note that once a drawee dishonours a bill, the holder (or his/her agent) must give notice of the dishonour to the drawer or endorser. Failure to give notice within a reasonable time discharges the party requiring notice, usually the drawer, from any liability with regard to that bill.
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