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Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?
- a)When the amount in the instrument differs in figures and words.
- b)When the instrument is drawn in sets of three.
- c)When the drawer and the drawee are the same persons.
- d)When the instrument is drawn outside of India.
Correct answer is option 'C'. Can you explain this answer?
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Under what circumstances can an instrument be treated as both a bill o...
An instrument can be treated as both a bill of exchange and a promissory note when the drawer and the drawee are the same persons. This situation allows the holder of the instrument to choose whether to treat it as a bill or a note. For example, if the drawer and drawee are the same fictitious person, the holder may treat the instrument as a note.
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Under what circumstances can an instrument be treated as both a bill o...
Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?
The correct answer to this question is option 'C' - when the drawer and the drawee are the same persons. Let's understand why this is the case:
1. Definition of a bill of exchange:
A bill of exchange is a negotiable instrument that contains an unconditional order from the drawer (the person who issues the instrument) to the drawee (the person who is directed to pay) to pay a certain sum of money to a specified person or bearer at a designated future date.
2. Definition of a promissory note:
A promissory note is a written promise by one party (the maker) to pay a certain sum of money to another party (the payee) at a specified future date or on-demand.
When the drawer and the drawee are the same persons, it creates a unique situation where the instrument can be treated as both a bill of exchange and a promissory note. This is because the instrument satisfies the requirements of both types of instruments.
Let's break down the reasons why this is possible:
1. Bill of exchange characteristics:
- An order to pay: When the drawer and the drawee are the same persons, the instrument essentially becomes an order from the drawer to themselves to pay a certain sum of money.
- Unconditional: The order to pay is still unconditional, as there are no additional conditions or contingencies attached to the payment.
- Future payment: The instrument specifies a future date for the payment, just like a typical bill of exchange.
2. Promissory note characteristics:
- Written promise: The instrument, even though it is an order to pay, can also be considered a written promise by the drawer to pay the specified sum of money.
- Future payment: Similar to a promissory note, the instrument specifies a future date for the payment.
Therefore, in the given scenario, the instrument can be treated as both a bill of exchange and a promissory note due to the unique circumstance of the drawer and the drawee being the same persons. This allows the instrument to satisfy the requirements of both types of instruments.
The correct answer to this question is option 'C' - when the drawer and the drawee are the same persons. Let's understand why this is the case:
1. Definition of a bill of exchange:
A bill of exchange is a negotiable instrument that contains an unconditional order from the drawer (the person who issues the instrument) to the drawee (the person who is directed to pay) to pay a certain sum of money to a specified person or bearer at a designated future date.
2. Definition of a promissory note:
A promissory note is a written promise by one party (the maker) to pay a certain sum of money to another party (the payee) at a specified future date or on-demand.
When the drawer and the drawee are the same persons, it creates a unique situation where the instrument can be treated as both a bill of exchange and a promissory note. This is because the instrument satisfies the requirements of both types of instruments.
Let's break down the reasons why this is possible:
1. Bill of exchange characteristics:
- An order to pay: When the drawer and the drawee are the same persons, the instrument essentially becomes an order from the drawer to themselves to pay a certain sum of money.
- Unconditional: The order to pay is still unconditional, as there are no additional conditions or contingencies attached to the payment.
- Future payment: The instrument specifies a future date for the payment, just like a typical bill of exchange.
2. Promissory note characteristics:
- Written promise: The instrument, even though it is an order to pay, can also be considered a written promise by the drawer to pay the specified sum of money.
- Future payment: Similar to a promissory note, the instrument specifies a future date for the payment.
Therefore, in the given scenario, the instrument can be treated as both a bill of exchange and a promissory note due to the unique circumstance of the drawer and the drawee being the same persons. This allows the instrument to satisfy the requirements of both types of instruments.
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Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer?
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Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer?.
Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Under what circumstances can an instrument be treated as both a bill of exchange and a promissory note?a)When the amount in the instrument differs in figures and words.b)When the instrument is drawn in sets of three.c)When the drawer and the drawee are the same persons.d)When the instrument is drawn outside of India.Correct answer is option 'C'. Can you explain this answer?.
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