Acceptance of Bills of Exchange: General and Qualified Acceptance (Sections 33, 34 and 86)

A bill of exchange is only an order until the drawee agrees to obey it. Acceptance is that agreement: the drawee's signed assent, which turns him into the acceptor and makes him the principal debtor on the bill. This note explains what counts as an acceptance, who can accept, how several drawees accept, the difference between general and qualified acceptance, and what happens when a holder takes a qualified acceptance without the consent of earlier parties.

1. Meaning and Requirements

Under Section 7, the drawee becomes the acceptor when he "has signed his assent upon the bill, and delivered the same, or given notice of such signing to the holder or to some person on his behalf". The requirements are:

Written on the bill: acceptance must appear on the bill itself, usually across its face. An acceptance on a separate paper or given orally is not an acceptance under the Act.
Signed by the drawee: the drawee or his authorised agent must sign. In practice the word "accepted" is written with the signature, often with the date and place of payment.
Delivery or notice: the acceptance is complete only when the bill is delivered back or notice of signing is given. Until then, the drawee may cancel his signature.
Time for deliberation: the drawee is allowed 48 hours, excluding public holidays, after presentment to decide whether to accept (Section 63; Topic 25).

2. Who May Accept (Section 33)

Section 33, Negotiable Instruments Act, 1881

No person except the drawee of a bill of exchange, or all or some of several drawees, or a person named therein as a drawee in case of need, or an acceptor for honour, can bind himself by an acceptance.

The drawee, or all or some of several drawees.
A drawee in case of need, named in the bill or an indorsement (Section 7; Topic 32).
An acceptor for honour, after protest for non-acceptance (Sections 108 to 111; Topic 32).

A stranger who signs a bill as "acceptor" is not liable as an acceptor, though he may be liable in another capacity, for example as an indorser or under a separate guarantee.

3. Several Drawees (Section 34)

Section 34, Negotiable Instruments Act, 1881

Where there are several drawees of a bill of exchange who are not partners, each of them can accept it for himself, but none of them can accept it for another without his authority.

Partners can bind the firm by an acceptance in the firm name. Where drawees are not partners, each accepts only for himself; an acceptance not signed by all of them is a qualified acceptance under Section 86.

4. General and Qualified Acceptance

A general acceptance assents to the order of the drawer without qualification. A qualified acceptance varies the effect of the bill as drawn. Under the Explanation to Section 86, an acceptance is qualified:

(a) Conditional: where it makes payment depend on an event stated in it, such as "accepted, payable on delivery of the goods".
(b) Partial: where it undertakes payment of part only of the sum, such as "accepted for Rs. 6,000" on a bill for Rs. 10,000.
(c) Local: where, no place of payment being specified, it states a place where it will be paid "and not otherwise, or elsewhere", or where a place is specified and it states a different place.
(d) As to time: where it undertakes payment at a time other than when the bill would legally be due, such as "accepted, payable in six months" on a three-month bill.
(e) Not by all drawees: where the drawees are not partners and not all of them sign (Section 86, main text).

⚠ Note

An acceptance that merely names a place of payment, without words such as "only" or "and not elsewhere", is a general acceptance. It becomes qualified only if it restricts payment to that place, or substitutes a place different from the one in the bill.

5. The Holder's Choice and Its Consequences

Refuse it: the holder is not bound to take a qualified acceptance. He may treat the bill as dishonoured by non-acceptance (Section 91; Topic 29) and proceed against the drawer and indorsers after notice.
Take it with consent: he may take the qualified acceptance and obtain the consent of the earlier parties, who then remain liable.
Take it without consent (Section 86): if he acquiesces in a qualified acceptance, all previous parties whose consent has not been obtained are discharged as against him and those claiming under him, unless, on notice given by the holder, they assent to it.

The reason for Section 86 is that the drawer and indorsers agreed to stand behind a bill payable in a particular way. A holder who accepts a different engagement from the drawee, without their agreement, alters their risk, and the law releases them.

6. Effect of Acceptance

Principal debtor: the acceptor is bound to pay at maturity, or on demand if he accepted at or after maturity, according to the apparent tenor of the acceptance (Sections 32 and 37).
Estoppels: the acceptor of a bill payable to order cannot deny the payee's capacity to indorse against a holder in due course (Section 121; Topic 38).
Forged indorsements: an acceptor of a bill already indorsed is not relieved by forgery of the indorsement if he knew or had reason to believe it was forged when he accepted (Section 41; Topic 20).
Drawer becomes surety: after acceptance, the drawer is liable only as surety for the acceptor.

⚠ Key point

Acceptance is the drawee's signed assent on the bill, complete on delivery or notice (Section 7). Only the drawee, all or some of several drawees, a drawee in case of need or an acceptor for honour can accept (Section 33); drawees who are not partners accept only for themselves (Section 34). An acceptance is qualified if it is conditional, partial, local, varies the time, or is not signed by all non-partner drawees. The holder may treat a qualified acceptance as dishonour; if he acquiesces in it without their consent, previous parties are discharged unless they assent on notice (Section 86). The acceptor becomes the principal debtor.

7. Related Topics and Provisions

Bill of exchange (Topic 7)
Presentment for acceptance (Topic 25)
Dishonour (Topic 29)
Acceptance for honour and case of need (Topic 32)