Multiple choice

Payment of which of the following cheques can be treated as a payment in due course, if otherwise in order?

  1. A mutilated cheque

  2. Payment of a cheque crossed as ‘account payee’ and endorsed by its payee Mr. X in favour of Y

  3. Payment of a bearer cheque to Mr. X through it is drawn in favour of Mr. Y and there is endorsement by Y in favour of Mr. Z

  4. Payment of a cheque stopped by a partner who is not authorized to operate the account of the partnership firm
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

“Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned. Thus, payment of a bearer cheque to Mr. X through it is drawn in favour of Mr. Y and the endorsement by Y in favour of Mr. Z comes under “Payment in due course”. 

Keep practicing — related questions