Question

Which of the following person/s do/does not incur any liability as parties to negotiable instruments?

• A. Minors
• B. Lunatics
• C. Drunken person
• D. All of the above

Answer 1

Answer: (D)

All of the above

The different cases of incapacity to incur liability as a party to negotiable instrument are:

1. Minor: A minor can be a party to negotiable instrument but he does not incur any liability himself although other adult parties to the instrument remain liable thereon.
2. Insolvent: An insolvent is not competent to draw, make, accept or indorse a negotiable instrument so as to bind his estate
3. Joint stock company: A company being an artificial person is competent of doing only such acts as are expressly or implied allowed by its Memorandum of Association. Hence if a company executes (i.e., draws, accepts or negotiates) a negotiable instrument without being authorised to do so by its Memorandum of Association, the instrument is void and even holder in due course cannot enforce the same against the company.
4. Agent: An agent can execute negotiable instruments so as to bind his principal in that capacity (i.e., as a drawer, maker, acceptor or indorser) only for which he is expressly authorised by the principal in very clear terms.
5. Legal representative: A legal representative of a deceased person who signs his name to a negotiable instrument is liable personally thereon unless he expressly limits his liability to the extent of the assets inherited by him from the said deceased.
6. Insane or Lunatics: A lunatic or insane or drunk person does not incur any liability as parties to negotiable instruments.