1. Farhan, a contractor, gave Mr Gani a signed document stating: 'I promise to pay Mr Gani Tk 100,000 if I win the tender for the Ashulia project.' Mr Gani, who has already done design work for Farhan, later indorses the document to his supplier, Mr Hasib, in settlement of a Tk 100,000 debt. Farhan lost the tender. Mr Hasib sues Farhan on the document as a promissory note, saying that he is a holder in due course who took it without notice of any defect. What is the correct analysis?

A) The document is not a promissory note, because the promise is conditional on an uncertain event
B) The document is a promissory note because it is in writing, signed by the maker, and names a payee and a certain sum of money
C) The document is a promissory note and Mr Hasib succeeds as holder in due course because the condition cannot be pleaded against such a holder
D) The document is a bill of exchange because it contains a conditional order directing Farhan to pay money to a named payee

Correct: A complex Definitions of promissory note, bill of exchange and cheque

Option A is correct. A promissory note must contain an unconditional undertaking to pay. A promise to pay only if an uncertain event happens (winning the tender) is conditional, so the document is not a note and there is no instrument to which holder in due course rules can apply. Option B is wrong: the promise is not unconditional, and the other formalities do not make up for that. Option C is wrong: holder in due course status presupposes a valid negotiable instrument. Option D is wrong: it is an undertaking by the signer, not an order directed to another person.

2. Sadia, a jute exporter, signed an instrument addressed to her bank manager Tara which read: 'Pay to Mr Rafiq or order Tk 80,000 out of the proceeds of my jute consignment to Dubai.' Mr Rafiq presented it to Tara, who refused to pay because the consignment proceeds had not been received. Mr Rafiq claims that the instrument is a valid bill of exchange and that Sadia must pay. Which is the right analysis of its status?

A) It is a valid bill because the order is signed, certain in amount and names a certain payee, so any reference to the fund is irrelevant
B) It is not unconditional because it directs payment out of a particular fund
C) It is a valid cheque because it is addressed to a banker holding funds of the signer and is payable to the order of a named person
D) It is valid only if Tara accepts it in writing, because acceptance removes any condition contained in the order given by the drawer

Correct: B complex Definitions of promissory note, bill of exchange and cheque

Option B is correct. An order to pay out of a particular fund is not unconditional and so not a bill. An unqualified order merely indicating the fund from which the drawee is to reimburse itself would be unconditional, but this instrument limits the payment to the proceeds. Option A is wrong: the reference to the fund makes the order conditional. Option C is wrong: an order payable only from a specified fund is not a cheque, which must be an unconditional order on a banker. Option D is wrong: acceptance cannot cure a condition in the drawer's order.

3. Hasan buys goods from Iqbal for Tk 600,000, giving a bearer cheque after Iqbal falsely told him the goods were certified organic. Iqbal indorsed the cheque by delivery to Jewel, a supplier, in exchange for goods worth Tk 600,000 supplied two days before presentation. Jewel had no knowledge of the falsehood. Hasan stops payment, discovering the fraud. Jewel sues Hasan. Who prevails?

A) Hasan, because a cheque obtained by fraud is void against every holder in all circumstances whatever the knowledge of the holder
B) Hasan, because Jewel did not give consideration directly to Hasan, the drawer, as required for a holder to enforce a cheque
C) Jewel, a holder in due course, since the defect in Iqbal's title does not affect her
D) Neither, because a cheque ceases to be a negotiable instrument as soon as the drawer countermands payment to the bank concerned

Correct: C difficult Holder in due course

Option C is correct. A holder in due course takes free from defects in the title of prior parties. Jewel gave value, received the cheque before it was overdue and without notice of any defect, so Hasan cannot set up Iqbal's fraud against her. Option A is wrong: fraud makes the transaction voidable between the parties, not void against a holder in due course. Option B is wrong: consideration need not pass between the holder and the drawer. Option D is wrong: countermand is a bank instruction that does not destroy negotiability.

4. Under s 118 of the Negotiable Instruments Act, as described in the manual, which of the following correctly states a presumption that the court makes about a negotiable instrument in a suit between the parties, unless the contrary is proved? Mr Alam sues Mr Babul on a promissory note, and Mr Babul pleads that he never received any money. The note is dated 5 March, bears three indorsements and was presented in April.

A) Every negotiable instrument was made for an unlawful object unless the holder proves that the object of the transaction was lawful
B) Every holder has notice of any defect in the title of a prior party unless the holder proves that he acted in good faith
C) Every indorsement on an instrument was made after the instrument became overdue unless the holder can show that it was earlier
D) Every negotiable instrument was made, accepted or indorsed for consideration

Correct: D complex Presumptions and estoppels

Option D is correct. Section 118 presumes consideration, that the date is the date of drawing, that a bill was accepted within a reasonable time, that transfers were before maturity, that indorsements were in the order appearing, that a lost instrument was stamped and that the holder is a holder in due course. Option A is wrong: the presumptions are the opposite of this. Option B is wrong: the presumption is that the holder is a holder in due course. Option C is wrong: the presumption is that transfers were made before maturity.

5. Ratan draws a cheque on his current account for Tk 5,000 payable to Sumon, but, contrary to bank practice, leaves a gap before the figure and the words, so that the amounts could be easily altered. A dishonest employee of Sumon uses the gaps to alter the figure from 5,000 to 50,000 and the words from 'Five thousand' to 'Fifty thousand', and cashes the cheque for Tk 50,000. Ratan's bank pays in good faith. Ratan claims that the bank must restore Tk 45,000. Which statement is correct?

A) The loss falls on Ratan, because his negligence in drawing the cheque facilitated the alteration
B) The bank must restore the whole Tk 45,000, because a bank can never debit a customer for an altered cheque in any circumstances
C) The bank must restore the amount, because any material alteration automatically discharges the bank from its mandate with the customer
D) The loss is shared equally between Ratan and the bank, because both made errors of judgment in dealing with the cheque

Correct: A complex Discharge from liability

Option A is correct. A customer who draws a cheque so negligently as to facilitate alteration cannot complain of a bona fide payment by the bank. The loss falls on him, since the bank was misled by his carelessness. Option B is wrong: a customer's negligence alters the usual rule. Option C is wrong: an alteration does not remove the customer's responsibility where he caused it by negligence. Option D is wrong: there is no rule of equal sharing.

6. Ahsan's bank pays Tk 400,000 on a cheque payable to order which bears a forged signature of the drawer, Ahsan, and which was presented by a collecting bank on behalf of a customer who obtained it from a thief. The bank argues that it paid in good faith and that s 85 protects it, as the cheque was payable to order and indorsed. Ahsan demands that his account be re-credited. What is the position?

A) Section 85 protects payment on any forgery, so long as the bank acted in good faith and without negligence in making the payment
B) Section 85 covers a forged payee indorsement, not a forged drawer signature, so the bank loses
C) The bank is protected because a customer must take precautions to prevent forgeries by his servants and must bear the loss
D) The bank is protected only if the cheque was crossed generally and was paid to another banker for the account of a customer

Correct: B difficult Discharge from liability

Option B is correct. Section 85 discharges a banker who pays in due course a cheque payable to order purporting to be indorsed by the payee, even if the indorsement is forged. It gives no protection where the drawer's signature is forged because the banker should know his customer's signature. Option A is wrong: s 85 is limited to forged payee indorsements. Option C is wrong: that duty concerns negligence in drawing, not forged signatures as such. Option D is wrong: crossing is not the test for s 85 protection.

7. Pipul Ltd, a trading company, and Rani Charity Trust Ltd, a non-trading company whose objects are limited to charity relief, each accepted a bill of exchange for Tk 2m drawn by a supplier. The bill accepted by Rani Charity Trust Ltd is now dishonoured and is held by a holder in due course. Which statement correctly states the position of the two companies?

A) Both companies are liable to the holder in due course because capacity on negotiable instruments is the same as capacity to contract
B) Neither company is liable, because a corporation cannot accept a bill of exchange under any circumstances under the Act
C) A trading company has an implied power to accept bills, but a non-trading company has none unless its objects clause authorises it
D) Both are liable because ultra vires does not affect the rights of a holder in due course who took the bill without notice

Correct: C complex Capacity of parties

Option C is correct. The power of a company to bind itself by negotiable instruments derives from its memorandum. A trading company has an implied power, but a non-trading company has none unless expressly authorised, and if it exceeds its powers the acceptance is void even against a holder in due course. Option A is wrong: capacity of a corporation depends on its memorandum and not simply on contractual capacity. Option B is wrong: trading companies have implied power. Option D is wrong: ultra vires acts remain void even against a holder in due course.

8. Rafi, aged 16, drew a cheque for Tk 30,000 on his own account, which he had opened with funds from his grandfather, in favour of a bookshop, Pathak Ltd. Pathak Ltd indorsed it to a printing press, Mudran Ltd, a holder in due course. The cheque was dishonoured as the account lacked funds. Mudran Ltd sues Rafi, and also the bookshop. Which statement is correct about the parties' liabilities?

A) Rafi is liable to Mudran Ltd as a holder in due course, because minors are liable on negotiable instruments like any other adult
B) Neither Rafi nor Pathak Ltd is liable, because the cheque drawn by a minor is void against all parties to the instrument
C) Rafi is liable only to the extent of the funds he deposited, since the minor's liability is limited to his funds under the Act
D) Rafi is not liable even to a holder in due course, but Mudran Ltd may enforce the cheque against Pathak Ltd

Correct: D complex Capacity of parties

Option D is correct. A minor may draw or indorse an instrument and make other parties liable, but cannot make himself liable and can plead incapacity even against a holder in due course. Pathak Ltd as indorser remains liable. Option A is wrong: a minor cannot be made liable on the instrument even to a holder in due course. Option B is wrong: the minor's incapacity does not extinguish the liability of other parties. Option C is wrong: there is no limited liability of a minor on the instrument.

9. Karim, an employee of Dutta Traders, signs a promissory note for Tk 1m in favour of a supplier, writing only his own name 'Karim' on the note and stating nowhere that he signs for Dutta Traders. The supplier believed that the owner, Mr Dutta, was to be liable. On default, the supplier sues both Karim and Mr Dutta. Karim had authority to sign for the firm. What is Karim's position?

A) He is personally liable, as he signed without words showing that he signed as an agent for a principal
B) He is not liable, because an agent with authority is never personally liable on any instrument signed for his principal at the principal's request
C) He is liable only if he received a personal benefit from the credit extended to the firm by the supplier on this note
D) He is not liable, because the supplier knew Mr Dutta was the owner and must have intended to hold only the principal liable

Correct: A difficult Capacity of parties

Option A is correct. Section 28(1): a person who signs without adding words indicating that he signs as an agent on behalf of a principal is personally liable. Mere description as agent does not exempt him; he must make clear that he signs in a representative capacity. Option B is wrong: an agent who does not disclose his representative capacity is liable. Option C is wrong: personal liability does not depend on benefit. Option D is wrong: the supplier's belief does not protect Karim unless he induced Karim to sign on that belief.

10. A bill of exchange for Tk 700,000 is drawn by Kamal on Lutfa, accepted by Lutfa, and indorsed in blank by Mizan to Nazma. On the due date, Lutfa fails to pay. Nazma gives notice of dishonour to Kamal but not to Mizan. Nazma wishes to enforce the bill. Whom may she hold liable?

A) Lutfa, Kamal and Mizan, because notice to the drawer is notice to every other party who is liable on the instrument
B) Lutfa as acceptor, and Kamal as drawer on whom notice was given, but not Mizan, who received no notice
C) Only Kamal, as drawer of the bill, because Lutfa and Mizan are not parties liable to the holder after the dishonour
D) Only Lutfa, because the drawer and indorsers are discharged automatically once an acceptor has been identified

Correct: B complex Liability of parties

Option B is correct. The acceptor's liability is primary and does not depend on notice. The drawer's and indorsers' liability is conditional on due notice of dishonour. Mizan, an indorser who received no notice, is discharged. Option A is wrong: notice is required for each party the holder seeks to make severally liable. Option C is wrong: the acceptor is primarily liable. Option D is wrong: drawer and indorsers are not discharged by acceptance, only if notice is omitted.

11. Jahan, a legal representative of the late Mr Zaman, signs a promissory note for Tk 3m in her own name 'Jahan' to settle a creditor of the estate. The note does not limit her liability to the assets of the estate. The estate has assets of only Tk 1m. The creditor sues Jahan on the note. What is the position?

A) She is liable only to the extent of the Tk 1m in the estate, since a legal representative acts only as an agent of the estate
B) She is not liable at all, because a legal representative cannot make any note on behalf of the estate of a deceased person
C) She is personally liable for the whole amount unless she expressly limited her liability to the assets received
D) She is liable only if the creditor first obtains a decree against the estate and then fails to recover the amount in execution

Correct: C complex Liability of parties

Option C is correct. Section 29: a legal representative who signs an instrument in his own name is personally liable for the whole amount unless he expressly limits liability to the extent of the assets received. Option A is wrong: limitation of liability must be express. Option B is wrong: she may make the note in her own name and be liable. Option D is wrong: no prior decree is required.

12. Zakir signs a blank stamped paper, intending to authorise Tanvir to complete it as a promissory note for Tk 50,000, and hands it over. Tanvir fills in Tk 500,000 and negotiates it for value to Shirin, who has no notice of the limit. The paper is stamped to cover Tk 1m. Shirin sues Zakir on the note. What is the position?

A) Zakir is liable only for Tk 50,000, the amount he authorised, since a holder cannot recover more than the signer intended in any case
B) Zakir is not liable at all, because a blank signed paper is not a negotiable instrument and cannot become one by completion
C) Zakir is liable for Tk 1m, the full amount covered by the stamp, because the stamp value is the measure of the signer's liability
D) Zakir is liable to Shirin for Tk 500,000, being a holder in due course and the amount within the stamp

Correct: D difficult Inchoate, accommodation and fictitious instruments

Option D is correct. Under s 20, the signer of a stamped blank is liable on the note as completed, limited to the amount covered by the stamp, but only a holder in due course may recover more than the amount intended by the signer. Option A is wrong: a holder in due course may recover more than the amount intended. Option B is wrong: a signed stamped paper can be completed as a note. Option C is wrong: liability is for the amount specified up to the stamp, and Tk 500,000 is specified.

13. Majid, a friend of Nasir, signed a bill of exchange as acceptor without receiving anything from Nasir, for the purpose of helping Nasir to raise money from a bank. Nasir, the drawer, discounted the bill with Pubali Bank, which paid Tk 900,000 in cash. On maturity Nasir failed to provide funds. The bank sues Majid. He pleads that he received no consideration. What is the position?

A) Majid is liable to the bank, which gave value, although as against Nasir he may be entitled to be indemnified
B) Majid is not liable to the bank, because he received no consideration and an accommodation bill is unenforceable against its acceptor
C) Majid is liable to the bank only if Nasir has first been declared insolvent and the bank has proved in the insolvency
D) Majid is liable to Nasir but not to the bank, because the contract of accommodation concerns only the two friends

Correct: A complex Inchoate, accommodation and fictitious instruments

Option A is correct. An accommodation bill is signed without consideration to enable another party to raise money. The accommodation party is liable to a holder who gave value, and may seek indemnity from the party accommodated. Option B is wrong: consideration to the acceptor is not required where the holder gave value. Option C is wrong: there is no such precondition. Option D is wrong: the bank, as holder for value, is entitled to enforce.

14. An instrument reads: 'On demand I promise to pay Mr Rahman or order Tk 40,000, value received. Signed Mr Shafiq, to Mr Tipu.' Mr Rahman is unsure whether to treat it as a promissory note or as a bill of exchange, and indorses it to Mr Umar. When it is dishonoured, Mr Umar wants to know the character of the instrument. Which statement is correct?

A) It is void for uncertainty because an instrument cannot be both a bill and a note and so cannot be given effect to by the court
B) It is an ambiguous instrument, and the holder may treat it either as a promissory note or as a bill of exchange
C) It must be treated as a promissory note only, since the maker signed at the foot and the word 'promise' is used in it
D) It must be treated as a bill of exchange only, since the instrument names a person to whom the document is addressed

Correct: B complex Inchoate, accommodation and fictitious instruments

Option B is correct. An instrument which in form may be treated as either a bill or a note is ambiguous, and the holder may elect to treat it as either. Option A is wrong: the law permits the holder to elect. Option C is wrong: the use of the word 'promise' does not decide the matter, because the instrument is ambiguous and the holder elects. Option D is wrong: naming an addressee does not decide the matter either, because the holder may elect to treat it as a note.

15. Wasim, a trader in Dhaka, drew a bill on a buyer resident in Singapore, payable in Dhaka and indorsed by the payee in Mumbai. When the bill was dishonoured, the holder's solicitor asks whether it is an inland or foreign bill and whether it must be protested. What does the Act say?

A) It is an inland bill because it was drawn in Bangladesh and payable in Dhaka, whatever the residence of the drawee on whom it is drawn
B) It is an inland bill because indorsement abroad does not change its nature, and protest is never required for any bill
C) It is a foreign bill because it is drawn in Bangladesh on a person resident outside Bangladesh
D) It is a foreign bill only because it has been indorsed in Mumbai, which changes the nature of a bill drawn in Bangladesh

Correct: C difficult Inchoate, accommodation and fictitious instruments

Option C is correct. A bill drawn in Bangladesh on a person resident outside Bangladesh is a foreign bill. Foreign bills must be protested where required by the law of the place. Inland bills need not be protested. Option A is wrong: a bill drawn on a person resident abroad is foreign under the definition. Option B is wrong: protest is required for foreign bills where the law requires it, and the first part of this option reaches the wrong conclusion. Option D is wrong: indorsement abroad does not change the nature of an instrument.

16. Under section 35 of the Bangladesh Bank Order 1972, as described in the manual, Mr Feroz, a trader, issues a promissory note to Mr Gulam for Tk 1m, expressed as 'payable to bearer on demand'. When Mr Feroz refuses to pay, Mr Gulam sues. Mr Feroz argues that the note is unlawful. What is the position?

A) The note is valid because s 1A of the Negotiable Instruments Act permits any person to make a note payable to bearer on demand
B) The note is valid but only if it is registered with the Registrar of Joint Stock Companies within thirty days of its making
C) The note is valid because a bearer cheque and a bearer note are the same and both may be issued by any person
D) No person other than the Bangladesh Bank may issue a promissory note payable to bearer, so the note is unlawful

Correct: D complex Definitions of promissory note, bill of exchange and cheque

Option D is correct. The Bangladesh Bank Order 1972 gives the Bangladesh Bank the sole right to issue bank notes payable to bearer on demand and prohibits any other person from making or issuing a promissory note expressed to be payable to the bearer. Option A is wrong: the Act is subject to the Bangladesh Bank Order. Option B is wrong: registration is not the rule. Option C is wrong: cheques and drafts payable to bearer may be drawn on an account, but a bearer promissory note may not be issued.

17. A bill of exchange for Tk 400,000 payable to Mr Abdul or order is indorsed by Mr Abdul 'Pay Mr Babar only', then by Mr Babar in blank to Mr Chowdhury. Mr Chowdhury presents the bill and the drawee refuses to pay. He sues Mr Abdul. Mr Abdul says that his indorsement restricted negotiation to Mr Babar. Under s 50 as described in the manual, which statement is correct?

A) An indorsement 'Pay Mr Babar only' is restrictive and excludes the right of further negotiation by Mr Babar
B) The indorsement is not restrictive, because the absence of words of negotiation implies the right to negotiate further in any case
C) The indorsement is valid, but only Mr Babar may be held liable on the instrument since he took it under that indorsement
D) The indorsement 'Pay Mr Babar only' is conditional and must be disregarded as having no effect on the instrument

Correct: A complex Negotiation and indorsement

Option A is correct. The illustration to s 50 shows that 'Pay C only' excludes further negotiation by C. A restrictive indorsement restricts or excludes the right to negotiate further, so Mr Chowdhury cannot acquire a good title by Mr Babar's indorsement. Option B is wrong: words such as 'only' exclude further negotiation, while mere absence of words implying right to negotiate does not make an indorsement restrictive. Option C is wrong: liability turns on whether negotiation was excluded and not on who took it. Option D is wrong: such words are restrictive, not conditional.

18. Mr Nuru, a holder of a bearer cheque for Tk 250,000, hands it to Mr Obaid, his friend's agent, to keep for the friend, Mr Parvez. Mr Obaid acts only as custodian. The drawer later disputes the transfer, saying that the cheque has not been negotiated to Mr Parvez. Under ss 46 to 47 of the Act, as explained in the manual, what is the position?

A) The cheque is not negotiated because handing a bearer instrument to an agent for safe keeping is never a negotiation
B) The cheque is negotiated, because delivery of a bearer instrument to the transferee's agent completes negotiation
C) The cheque is negotiated only if Mr Nuru also signs on the back, since signature is essential for the transfer of a bearer instrument
D) The cheque is negotiated only if Mr Parvez receives it personally, because delivery to an agent does not constitute delivery

Correct: B difficult Negotiation and indorsement

Option B is correct. The illustration to s 47 states that delivery of a bearer instrument to B's agent to keep for B negotiates it to B. A bearer instrument is negotiable by delivery. Option A is wrong: delivery to the agent of the transferee for the transferee is effective. Option C is wrong: indorsement is not needed for a bearer instrument. Option D is wrong: delivery to an authorised agent is delivery to the principal.

19. Sunrise Traders received three documents from customers. The manager, Mr Quader, wants to know which of the documents in the stack are promissory notes in accordance with the illustrations to s 4. The documents say (1) 'I promise to pay B or order Tk 500', (2) 'I acknowledge myself to be indebted to B in Tk 1,000 to be paid on demand, for value received', (3) 'Mr B, IOU Tk 1,000', (4) 'I promise to pay B Tk 500 seven days after my marriage with C', (5) 'I promise to pay B Tk 500 and to deliver to him my black horse on 1 January next'. Which are promissory notes? (Select TWO.)

Multiple response
A) I promise to pay B Tk 500 seven days after my marriage with C
B) I promise to pay B Tk 500 and to deliver to him my black horse on 1 January next
C) Mr B, IOU Tk 1,000
D) I acknowledge myself to be indebted to B in Tk 1,000 to be paid on demand, for value received
E) I promise to pay B or order Tk 500

Correct: D, E complex Definitions of promissory note, bill of exchange and cheque

Option A is wrong: this one is not a promissory note in the illustration set because the marriage event is uncertain whether it will happen. Option B is wrong: a promise to pay money and also deliver goods is not a promise to pay money only. Option C is wrong: an IOU, a mere acknowledgment, is not a note. Option D is correct: an acknowledgment of debt with a promise to pay on demand is a note. Option E is correct: it is an unconditional promise to pay B or order.

20. Mr Rahim runs a trading firm and receives a cheque drawn by a customer on a scheduled bank. He asks his accountant to explain the differences between a cheque and a bill of exchange before deciding how to collect Tk 2m owed by two customers. The accountant notes the following. Which are correct? (Select THREE.)

Multiple response
A) Notice of dishonour is necessary on dishonour of a cheque, but not on the dishonour of a bill of exchange
B) A bill is entitled to days of grace whereas a cheque is payable immediately on demand
C) A cheque must be accepted by the bank before it can be presented
D) The drawee of a cheque is always a banker, whereas the drawee of a bill may be any person
E) A bill of exchange must be accepted before the acceptor is liable, whereas a cheque requires no acceptance

Correct: B, D, E complex Definitions of promissory note, bill of exchange and cheque

Option A is wrong: the position is the reverse. Notice is needed for a bill but want of assets is sufficient notice for a cheque. Option B is correct: days of grace apply to bills only. Option C is wrong: a cheque requires no acceptance. Option D is correct: a cheque is drawn on a banker. Option E is correct: acceptance is a feature of bills.

21. Under the Negotiable Instruments Act 1881, a minor, Rafi, aged 16, is involved in several transactions: he draws a cheque on his own bank account which has funds, he indorses a bill payable to him to Salma, and a supplier delivers goods on credit to him for which he signs a note. Which of the following statements about minors and negotiable instruments are correct? (Select THREE.)

Multiple response
A) A minor can set up his incapacity even against a holder in due course
B) A minor may draw, indorse, deliver or negotiate an instrument and can make all other parties liable except himself
C) A minor is liable to the same extent as an adult on any instrument he signs
D) A minor may be a payee and an instrument may be drawn or made in his favour
E) A minor who signs jointly with an adult is liable, but the adult is not

Correct: A, B, D difficult Capacity of parties

Option A is correct: the minor can plead incapacity. Option B is correct: s 26 allows a minor to bind others. Option C is wrong: a minor has no liability on the instrument. Option D is correct: a minor can be a payee. Option E is wrong: where signed jointly, the minor is not liable but the adult is.

22. Under the Act, a company, a bankrupt, and an agent all deal in instruments. A trading company, Pearl Ltd, a bankrupt person, Mr Hamid, and an agent, Mr Imran, who has a general authority to transact business and receive and discharge debts for his principal, are party to various instruments. Which of the following are correct? (Select THREE.)

Multiple response
A) A bankrupt cannot accept or indorse a bill during bankruptcy, though a holder in due course may recover from all parties except the bankrupt
B) A trading company has an implied power to draw or accept negotiable instruments
C) An authority to draw a bill of exchange includes authority to indorse
D) A general authority to transact business and to receive and discharge debts does not confer authority to accept or indorse bills so as to bind the principal
E) A non-trading company has an implied power to accept bills of exchange

Correct: A, B, D complex Capacity of parties

Option A is correct: the bankrupt's capacity is restricted. Option B is correct: trading companies have implied power. Option C is wrong: an authority to draw does not include authority to indorse. Option D is correct: express authority is needed for acceptance or indorsement. Option E is wrong: a non-trading company has no such implied power.

23. Mr Latif holds a bill for Tk 3m drawn by Orbit Traders on Zenith Ltd and indorsed to him through two earlier holders, Mr Sayeed and Ms Tahmina. Zenith Ltd accepted it, but on the due date it dishonoured the bill, and notice of dishonour was given promptly to the drawer and to both indorsers. Latif also holds a promissory note made by Mr Nasir and a cheque drawn by Orbit Traders on its bank, and he wants to proceed against every party who may be liable. His lawyer explains the liability of the drawer, the banker, the maker, the acceptor and the indorser, and Latif asks which of the lawyer's statements are correct. (Select THREE.)

Multiple response
A) The liability of the drawer of a bill is conditional and arises only on dishonour, provided due notice has been given
B) A banker's duty to pay a cheque is owed to the payee or the holder of the cheque
C) An indorser is liable to every subsequent holder on dishonour if he has notice of dishonour, unless there is a contract to the contrary or he expressly limited liability
D) The maker of a promissory note and the acceptor of a bill are primarily and unconditionally liable
E) The liability of an acceptor requires notice of dishonour before he can be sued

Correct: A, C, D complex Liability of parties

Option A is correct: s 30 sets drawer's conditional liability. Option B is wrong: the banker's duty runs to the customer. Option C is correct: s 35 provides for the indorser's liability. Option D is correct: the maker and acceptor are the principal debtors. Option E is wrong: the acceptor is primarily liable and needs no notice.

24. An instrument is held by Mr Dilshad, who was given a blank signed and stamped paper by a business associate, Mr Eshan, to complete as a note. Mr Dilshad wants to know the effect of the law on inchoate instruments. The lawyer explains several rules. Which are correct under s 20 and the manual? (Select THREE.)

Multiple response
A) The liability of the signer arises only when the blanks are filled in and the instrument completed
B) A signer does not incur liability as maker, drawer or acceptor until he has delivered the instrument
C) Delivery is not essential to fix the liability of the signer
D) The instrument must be filled up within a reasonable time and in accordance with the authority given
E) The signer is liable for any amount that the holder chooses to insert, whatever the stamp

Correct: A, B, D difficult Inchoate, accommodation and fictitious instruments

Option A is correct: the instrument is not valid until completion. Option B is correct: delivery is essential to fix liability. Option C is wrong: delivery is essential. Option D is correct: completion must follow the authority and be within a reasonable time. Option E is wrong: liability is limited to the amount covered by the stamp.

25. A merchant receives a bill of exchange drawn in the name of a non-existent person and payable to the drawer's order, accepted by his customer. When the bill is not paid, the customer, the acceptor, denies liability, saying that the drawer is fictitious. The merchant's lawyer explains the rules on fictitious bills. Which are correct? (Select THREE.)

Multiple response
A) The holder in due course must show that the signature of the supposed drawer and the first indorsement are in the handwriting of the same person
B) Where the payee is a fictitious or non-existing person, the bill may be treated as payable to bearer
C) The acceptor cannot deny liability by proving that the drawer is fictitious, as against a holder in due course
D) Only a holder who is the original payee may recover on a fictitious bill
E) A fictitious bill is a bill that is void for all purposes and cannot be enforced against any party

Correct: A, B, C complex Inchoate, accommodation and fictitious instruments

Option A is correct: that is the condition for the holder in due course to recover. Option B is correct: the Act so provides. Option C is correct: the acceptor is liable to a holder in due course. Option D is wrong: a holder in due course may recover. Option E is wrong: the bill is not void for all purposes.