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Section 86: Parties not consenting discharged by qualified or limited acceptance

Negotiable Instruments Act • Official Statutory Text & Practice Guide

Statutory Regulation
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Act 1881
Section 85 All 148 Sections of Negotiable Instruments Act Section 87

Legal Commentary & Landmark Judgments: Section 86

Section 86 regulates qualified or limited acceptances, enacting that if the holder of a bill of exchange acquiesces in a qualified acceptance, all prior parties who did not consent are discharged from liability.

  • Qualified Acceptance Definition: An acceptance is qualified if it is conditional, partial (paying part only), qualified as to place or time, or accepted by some but not all drawees.
  • Holder's Duty to Dissent: The holder is entitled to insist upon an absolute, unqualified acceptance; if offered a qualified acceptance, they may treat the bill as dishonoured.
  • Discharge of Non-Consenting Parties: If the holder accepts a qualified acceptance without the express consent of the drawer and prior indorsers, those prior parties are released.
Key Landmark Precedents:
  • Meyer v. Decroix [1891] AC 520: The House of Lords established that where an acceptor qualifies their acceptance, the holder accepts the qualification at their own peril regarding prior parties.
  • Bank of Baroda v. Punjab National Bank (AIR 1944 PC 58): Analyzed the legal effect of qualified bank acceptances on trade bills.
Courtroom Practice & Strategic Litigation Guidance:

If a drawee offers to accept a bill for Rs. 50,000 when drawn for Rs. 1,00,000, advise your client: do NOT accept without written permission from the drawer. Under Section 86, accepting the partial amount without permission destroys your remedy against the drawer for the balance.

Section 85 All 148 Sections of Negotiable Instruments Act Section 87