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A issues a bill to the order of J. J indorses it to P and P indorses it to M, M to R and R to S, the holder now of the bill. Which of the following is not true, if S decides to strike out any indorsement?

A. If S cancels the indorsement of P, P is relieved from liability
B. If S cancels the indorsement of J, J,P, M and R are relieved from liability
C. If S cancels the indorsement of P, P,M and R are relieved from liability
D. If S cancels the indorsement of M, M and R are relieved from liability

User Zutty
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1 Answer

6 votes

Final answer:

S may cancel indorsements on a bill, which releases the indorsed party and any subsequent indorsers from liability. When P's indorsement is cancelled, P, M, and R are relieved, while cancelling J's does not relieve J's subsequent indorsers. Thus, statement B is not true.

Step-by-step explanation:

If S cancels the indorsement of any party on a bill of exchange, it releases the indorsed party and any subsequent indorsers from liability. This is due to the sequential liability under the chain of indorsements. Each party in the chain is liable to the one who indorsed the bill to them unless a cancellation or discharge occurs. Therefore, let's address each statement provided.

A. If S cancels the indorsement of P, indeed P is relieved from liability, as it breaks the chain of liability from P onwards.

B. Incorrect. If S cancels the indorsement of J, it does not relieve the parties that J indorsed to from liability. So, P, M, and R would still be liable to the parties they indorsed to or who indorsed the bill to them. This statement is not true.

C. If S cancels the indorsement of P, P, M and R are indeed relieved from liability to S, as the chain of liability starting from P has been broken.

D. If S cancels the indorsement of M, both M and R are relieved from liability to S, as their connection in the chain of liability has been nullified.

User Vesan
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