Law · Negotiable Instruments Act, 1881
A documentary bill of exchange is presented to a bank for financing. The bill is accompanied by a Bill of Lading, an Insurance Policy, and an Invoice. The Bill of Lading is marked 'Freight Collect' and the Bill of Exchange is drawn 'At 90 days after sight.' If the bank chooses to discount this bill, what is the primary risk regarding the security of the goods?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The drawee is not liable to pay until the goods arrive at the port.
- 2The insurance policy is invalid for usance bills of exchange.
- 3The freight charges are unpaid, and the carrier has a lien on the goods.✓
- 4The bank has no legal title because the bill is a usance bill.
Correct answer
The freight charges are unpaid, and the carrier has a lien on the goods.
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