Section 45 NI Act: Partial failure of consideration not consisting of money

Negotiable Instruments Act, 1881

Section 45 NI Act at a Glance

Section 45 NI Act proportionally reduces the sum a holder in immediate relation with the signer can receive when part of a consideration not consisting of money fails and that part is ascertainable in money without collateral enquiry.

Section 45 NI Act Bare Act Text

45. Partial failure of consideration not consisting of money.

Where a part of the consideration for which a person signed a promissory note, bill of exchange or cheque, though not consisting of money, is ascertainable in money without collateral enquiry, and there has been a failure of that part, the sum which a holder standing in immediate relation with such signer is entitled to receive from him is proportionally reduced.

Section 45 NI Act in Simple Words

Section 45 NI Act deals with a promissory note, bill of exchange or cheque signed for a consideration that does not consist of money. When a part of that consideration fails, the sum that a holder standing in immediate relation with the signer is entitled to receive from the signer is proportionally reduced if the failed part is ascertainable in money without collateral enquiry.

For Section 45 NI Act to apply, the holder must stand in immediate relation with the signer, there must be a failure of a part of the consideration not consisting of money, and that failed part must be ascertainable in money without collateral enquiry. When these conditions are met, the sum the holder is entitled to receive from the signer is proportionally reduced.

When Section 45 NI Act Applies

  • A person signed a promissory note, bill of exchange or cheque for a consideration not consisting of money.
  • There has been a failure of a part of that consideration.
  • The failed part of the consideration is ascertainable in money without collateral enquiry.
  • The holder claiming payment stands in immediate relation with the signer.
  • The sum the holder is entitled to receive from the signer is proportionally reduced.

Example of Section 45 NI Act

Yusuf in Nagpur signs a cheque for ₹1,00,000 payable to Jyoti in exchange for 100 bags of grain priced at ₹1,000 per bag. Jyoti delivers only 60 bags of grain, so 40 bags fail to be delivered, and the value of that failed part (₹40,000) is ascertainable in money without collateral enquiry. Yusuf and Jyoti stand in immediate relation as maker and payee of the cheque. Under Section 45 NI Act, the sum that Jyoti is entitled to receive from Yusuf on the cheque is proportionally reduced to ₹60,000.

FAQs on Section 45 NI Act

What is Section 45 NI Act?▼

Section 45 NI Act provides for a proportional reduction in the sum recoverable on a promissory note, bill of exchange or cheque when part of a consideration not consisting of money fails. The reduction applies when the failed part is ascertainable in money without collateral enquiry and the holder stands in immediate relation with the signer.

When can a partial failure of consideration not consisting of money reduce the sum payable on an instrument?▼

When the failed part of the consideration is ascertainable in money without collateral enquiry and the claim is by a holder standing in immediate relation with the signer. In that case, Section 45 NI Act proportionally reduces the sum the holder is entitled to receive.

How does Section 45 NI Act differ from Section 44 NI Act?▼

Section 44 NI Act applies when the consideration consisted of money and was originally absent in part or subsequently failed in part. Section 45 NI Act applies when a part of the consideration does not consist of money, fails, and is ascertainable in money without collateral enquiry.

Does Section 45 NI Act apply against a holder who does not stand in immediate relation with the signer?▼

No. Section 45 NI Act reduces only the sum that a holder standing in immediate relation with the signer is entitled to receive from that signer.

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Disclaimer: This is for informational purposes only. Always consult a qualified advocate for legal advice.

Sources: Bare Act Text, Negotiable Instruments Act, 1881 (India Code) ·