Negotiable Instruments Act Section 86 — Parties not consenting discharged by qualified or limited acceptance

CHAPTER VII OF DISCHARGE FROM LIABILITY ON NOTES, BILLS AND CHEQUES

General

Summary

If the person holding a bill of exchange agrees to an acceptance that is qualified or limited—for example, only covering part of the amount, changing the place or time of payment, or not signed by all drawees when they are not partners—then all earlier parties who did not agree to this new acceptance are released from their obligations to the holder and anyone claiming through the holder. However, these earlier parties remain liable if the holder gives them notice of the qualified acceptance and they agree to it. A qualified acceptance includes one that is conditional on an event, covers only part of the sum, specifies a different place of payment than stated (or specifies a place when none was stated), or changes the payment time from what was originally due.

Official Text

If the holder of a bill of exchange acquiesces in a qualified acceptance, or one limited to part of the sum mentioned in the bill, or which substitutes a different place or time for payment, or which, where the drawees are not partners, is not signed by all the drawees, all previous parties whose consent is not obtained to such acceptance are discharged as against the holder and those claiming under him, unless on notice given by the holder they assent to such acceptance.

Explanation.—An acceptance is qualified

(a) where it is conditional, declaring the payment to be dependent on the happening of an event therein stated;

(b) where it undertakes the payment of part only of the sum ordered to be paid;

(c) where no place of payment being specified on the order, it undertakes the payment at a specified place, and not otherwise or elsewhere; or where, a place of payment being specified in the order, it undertakes the payment at some other place and not otherwise or elsewhere;

(d) where it undertakes the payment at a time other than that at which under the order it would be legally due.