Negotiable instrument.

What is meant by an unconditional order? And why a conditional order makes a document non negotiable?

asked Dec 17, 2016 in Bills of Exchange and Promissory Notes by cute shanaya (18 points) 301 views

1 Answer

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In a negotiable instrument, the order should be 'UNCONDITIONAL'.  It means the payment of money should not be dependent on any condition.  Example of a conditional order is 'Pay to Suresh a sum of Rs.5000 on receipt of goods from him'.  In this payment can be made only on receipt of goods.  Why such a bill of exchange becomes non-negotiable?   Now this instrument is not negotiable because unless goods are received, payment cannot be made to Suresh. Hence Suresh cannot endorese it to anyone till goods are received.  Another question is, who will confirm receipt of goods and on which document.  So this makes the whole process cumbersome.  This is the reason the order should be unconditional in any negotiable instrument.

answered Dec 18, 2016 by jbsclasses (3,971 points)