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negotiable-instruments:note:qualified-acceptance

Parties not consenting discharged by qualified or limited acceptance

Section 86 of the Negotiable Instruments Act,1881.

If the holder of a bill of exchange acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent is not obtained to such acceptance are discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance.

Explanation.

An acceptance is qualified:

(a) where it is conditional, declaring the payment to be dependent on the happening of an event therein stated;
(b) where it undertakes the payment of part only of the sum order to be paid;
(c) where no place of payment being specified on the order, it undertakes the payment at a specified place, and not otherwise or elsewhere; or where, a place of payment being specified in the order, it undertakes the payment at some other place and not otherwise or elsewhere;
(d) where it undertakes the payment at a time other than that at which under the order or would be legally due.

This section lays down that a qualified acceptance of a bill discharges all parties who do not consent to it. The acceptance of a bill may either be general or qualified. When a bill is accepted according to the apparent tenor of it the acceptance is general , but when a bill is not accepted as drawn i.e. according to its apparent tenor but with certain qualification or variation the acceptance is a qualified acceptance.

The drawee of a bill or a hundi has the option of either accepting it or not accepting it. If he has entered into a contract with the drawer already, he is bound by such contract to accept the bill or he will make himself liable for the actual damage caused by non-acceptance.

When, therefore, the drawee accepts a bill the holder has the right to insist on a full and unqualified acceptance i.e. acceptance according to the apparent tenor of the bill. If the drawee, under such circumstances, refuse to accept it unconditionally the holder can treat the bill as dishonoured by non-acceptance and protest it accordingly. But if the holder without treating the bill as dishonoured, acquiesces in a qualified acceptance by the drawee without the consent of the prior parties to the bill he does so at his own risk and the prior parties whose consent is not obtained for such qualified acceptance will not be bound by it. The result of taking such qualified acceptance will be to discharge all prior parties not consenting to such acceptance. The holder has to notify all prior parties about this qualified acceptance and if after such notice the prior parties signify their consent to such acceptance their liability will continue as before.

In Faheem Ahmed vs. Abud Khan 1) Delhi District Court observed that:

Section 86 states that where the holder acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent has not been obtained to such acceptance would stand discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance.

Qualified acceptance

An acceptance may be qualified in a variety of ways.

  1. It may be conditional, i.e. it may make the payment of a bill by the acceptor dependent on the fulfilment of a condition stated by him in his acceptance, or
  2. it may be partial i.e. an acceptance to pay part only of the amount for which the bill is drawn, or
  3. it may be local i.e. to pay only at a particular specified place, unless, however, the acceptance expressly states to pay there and there only, it will be regarded as a general acceptance , or to pay at a place different from what is mentioned in the instrument , or
  4. it may be qualified as to time i.e. when it is to be paid at a time different from that fixed in the instrument by the drawer, or
  5. finally, it may be qualified by being accepted by one or more of the drawees and not by all
    1. when the joint drawees are not partners.
    2. In case the joint drawees are partners, acceptance by one will operate as acceptance by all.

It is to be noted that the section does not exhaustively lay down the instances of qualified acceptance. Besides, what have been stated in this section, as instances of other kinds of qualified acceptance may be mentioned the condition of making payment only through a particular medium e.g. bank notes or in a different currency. Whether an acceptance is conditional or not is a question of law to be determined according to the circumstances of each particular case. The section does not apply to cheques.2)

1)
Cc No.259/2013
2)
Silchar Bank vs. Pioneer Bank, 1951 Assam 127