Qualified and Unqualified Acceptance | Meaning | Types

An acceptance on the bill may be classified into general acceptance and qualified acceptance.

General or Unqualified Acceptance

A general acceptance is absolute. An acceptance which gives assent without qualification to the order of the drawer, is termed as ‘general acceptance‘. In general or unqualified acceptance the drawee accepts the order of the drawer to pay the amount as specified in a bill in full, without any condition or qualification. As a rule, an acceptance has to be general in order to be valid.

Qualified Acceptance

A qualified acceptance is one wherein the drawee accepts a bill subject to conditions or qualifications as to time, place, event, amount, etc.

The holder of a bill is not bound to take a qualified acceptance. If, however, he accepts a conditionally accepted bill, he must be careful to secure the assent (if possible) of all the prior parties, because they are discharged unless they give their consent to such qualified acceptance.

Simply put, if the holder takes a conditionally accepted bill, no other party prior to him would be liable to pay the bill in the absence of their consent to the qualified acceptance. Also, a conditional or qualified acceptance may render a bill invalid.

Types of Qualified acceptance

On the basis of the above explanation of a qualified acceptance, it may be of following five types.

  1. Qualified as to place;
  2. Qualified as to amount;
  3. Qualified as to time;
  4. Acceptance made by some of the drawees only, and;
  5. Acceptance made for payment in installments.

1. Qualified as to place:  An acceptance qualified as to place is one by which the drawee undertakes to pay a bill only at a specified place and not anywhere.

For example, an acceptance reading as ‘Accepted payable at Canara Bank only‘, or ‘Accepted payable at Canara bank and not elsewhere‘. It must be noted that the usage of the words ‘only‘ or ‘not elsewhere‘, is important to render an acceptance qualified otherwise it will be treated as general acceptance. For example, if a bill is accepted reading as ‘Accepted payable at Canara bank‘, then it will be a general acceptance and not a qualified one for the fact it does not explicitly state that the bill is nowhere payable except at Canara bank.

2. Qualified as to amount: If the drawee while accepting a bill of exchange undertakes the payment of part only of the sum ordered to be paid, the acceptance is said to be qualified as to amount.

3. Qualified as to time: An acceptance can be made qualified as to time. If the drawee while accepting a bill of exchange undertakes to pay the bill at a time different from that mentioned in the instrument itself, whether sooner or later. For instance, a bill drawn payable 60 days after date and accepted in words reading as ‘Accepted payable 75 days after date‘. Or, ‘Accepted payable 30 days after date‘, the acceptance is qualified as to time.

4. Acceptance made by some of the drawees only:  An acceptance made by one or more of the several drawees but not by all, is also a qualified acceptance. As a rule, however, if a bill is drawn on several persons (not being partners), acceptance must be made by all. If only some of the drawees accept the bill and even one of them refuses to accept, the holder has a right to treat the bill dishonored. The case of a partnership firm is, however, different wherein due to agency relationship, acceptance by any one or more drawees (partners) is considered acceptance by all and therefore, will be binding on the firm.

5. Acceptance made for payment in installments: It is the acceptance by which drawee agrees to discharge the bill in installments.

Condition or qualification of acceptance must be started very clearly. It should appear on the face of the instrument in clear and unambiguous language. If the drawee wishes to make any qualification while giving acceptance, he/she must do so on the face of the instrument in such a manner that the holder of it does not fall short to understand that it was accepted subject to certain qualifications.

Related Post

Share the Knowledge: