This lesson covers the law of negotiable instruments, with a focus on cheques, their features, types, endorsements, and the legal responsibilities of banks in the collection and payment process.

3.1 Definition and Features of Negotiable Instruments
A negotiable instrument is a written document that promises to pay a sum of money, which can be transferred from one person to another. The key features include: it must be in writing, signed by the maker or drawer, contain an unconditional promise or order to pay a sum certain in money, be payable on demand or at a definite time, and be payable to order or to bearer. The ABA Law and Banking course covers the requirements of negotiable instruments as defined by Uniform Commercial Code Article 3 .

3.2 Cheques: Types and Crossings
A cheque is a bill of exchange drawn on a specified banker, payable on demand. The Dempo College syllabus covers “Cheques – Crossing, types of crossings, Making of Cheques and Endorsement, Collection of Cheques, Payment of Cheques & Dishonour” as core topics . Types of cheque crossings include:

• General Crossing: The cheque bears two parallel transverse lines with or without the words “and company” or “not negotiable.”

• Special Crossing: The cheque bears the name of a specific banker between the parallel lines.

• Account Payee Crossing: The cheque is marked “account payee only,” indicating it should only be credited to the payee’s account.

3.3 Holder, Holder in Due Course, and Endorsements
The concepts of holder and holder in due course are fundamental to negotiable instrument law. A holder is any person in possession of a negotiable instrument who is entitled to receive payment. A holder in due course is a holder who takes the instrument for value, in good faith, and without notice of any defect in title . They enjoy special privileges, including taking the instrument free from many defences. Endorsement is the act of signing a negotiable instrument to transfer it to another person. Types of endorsement include blank, special, restrictive, and conditional endorsements.

3.4 Collecting and Paying Bankers: Duties and Protections
The collecting banker is the bank that receives a cheque for collection on behalf of a customer. Duties include presenting the cheque for payment in a timely manner. Statutory protection is provided to the collecting banker under certain conditions, such as acting in good faith and without negligence . The paying banker is the bank on which the cheque is drawn. Duties include verifying the customer’s signature, ensuring the cheque is not post-dated or stale, and ensuring sufficient funds. Statutory protection is provided if the banker pays in good faith and in the ordinary course of business . The ABA course covers the “legal responsibilities of banks in collections and returns as governed by the UCC and federal regulation” .