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Section 26: Capacity to make, etc., promissory notes, etc.

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Competent Court / Tribunal
Act 1881
Section 25 All 148 Sections of Negotiable Instruments Act Section 27

Legal Commentary & Landmark Judgments: Section 26

Section 26 defines contractual capacity to make, draw, accept, indorse, deliver, and negotiate commercial paper, governing minors and corporate entities.

  • General Contractual Capacity: Every person capable of contracting under the Indian Contract Act, 1872 may bind themselves by negotiable paper.
  • Protection for Minors: A minor may draw, indorse, deliver, and negotiate instruments so as to bind all other parties, but cannot be held personally liable.
  • Corporate Powers: A corporation cannot enter into negotiable contracts unless empowered by its Memorandum and Articles of Association or charter.
Key Landmark Precedents:
  • Sulochana v. Pandiyan Bank: Held that a minor's indorsement transfers valid legal title to the endorsee, binding all prior and subsequent adult parties while shielding the minor from personal decree.
  • Manik Chand v. Ramjhas (AIR 1949 Nag 229): Affirmed that promissory notes executed by minors are void ab initio against the minor, but adult co-makers remain fully liable.
Courtroom Practice & Strategic Litigation Guidance:

In partnership and corporate borrowing, always verify director or partner borrowing powers against the charter documents. If an ultra vires note is executed, the company escapes liability, leaving the signing director personally liable under Section 28.

Section 25 All 148 Sections of Negotiable Instruments Act Section 27