Which of the following actions renders all parties as discharged from liability to a negotiable instrument?
A)when the instrument is presented for payment
B)when the signature of the indorser is intentionally struck out
C)when the instrument is accidentally destroyed or mutilated
D)when a drawee in good faith pays an unaccepted instrument in full to the holder

Question

Quizplus · Accepted Answer

When a drawee in good faith pays an unaccepted instrument in full to the holder, all parties involved in the instrument are discharged from their liability. This is because the drawee has paid the full amount due on the instrument to the holder, and therefore, the holder has no further claim against anyone else. Options A, B and C do not necessarily discharge all parties from liability. For instance, in option A, only the party that makes the payment is discharged from liability, while the other parties remain liable. Option B only discharges the indorser from liability, not all parties involved in the instrument. Option C does not discharge all parties from liability, as the holder can still recover the amount due from the parties involved in the instrument if they are able to produce a valid evidence of the instrument.

Which of the Following Actions Renders All Parties as Discharged