According to the Negotiable Instruments act, an Inchoate Instrument is a document which is _______

The correct answer is Incomplete.

Key Points

• An Inchoate Instrument refers to a negotiable instrument that is incomplete in certain material aspects but can still be made complete.
• According to Section 20 of the Negotiable Instruments Act, 1881, an inchoate instrument is valid if the maker or drawer has signed the document and it is later completed as per the authority granted.
• Such instruments may lack essential details like the amount, the date, or the payee’s name at the time of issuance.
• The holder of the incomplete instrument is authorized to fill in the missing details, provided it aligns with the authority given by the drawer or maker.
• Despite being incomplete, inchoate instruments are legally binding and enforceable once completed appropriately.

Additional Information

• Negotiable Instruments Act, 1881:
  • The act governs various types of negotiable instruments such as bills of exchange, promissory notes, and cheques.
  • It defines the rights and liabilities of parties involved in negotiable instruments.
  • The primary objective of the act is to ensure smooth facilitation of trade and commerce by providing legal validation to these instruments.
• Material Alteration:
  • Refers to unauthorized changes made to a negotiable instrument that alters its original terms.
  • Such alterations can render the instrument void unless consented to by all parties involved.
• Holder in Due Course:
  • A person who acquires a negotiable instrument for consideration before its maturity and without notice of any defect in the title.
  • Holders in due course enjoy special privileges, such as the right to enforce payment even if the instrument was previously defective.
• Blank Endorsement:
  • An endorsement where the endorser signs without specifying the name of the endorsee.
  • Such an instrument becomes payable to bearer and can be negotiated by mere delivery.
• Types of Negotiable Instruments:
  • Promissory Note: A written promise to pay a specific sum to a person or bearer.
  • Bill of Exchange: An order by one party directing another party to pay a specified sum to a third party.
  • Cheque: A bill of exchange drawn on a bank payable on demand.