Module: General Practice
Q179: Consider the following regarding the liability of a "Drawee in Case of Need".
Assertion (A): The "Drawee in Case of Need" is liable to pay the bill of exchange only after the original drawee has refused to accept or pay the bill.
Reason (R): The name of a "Drawee in Case of Need" is added to a bill of exchange to protect the drawer's credit or honor in case the original drawee defaults.
Reason (R): The name of a "Drawee in Case of Need" is added to a bill of exchange to protect the drawer's credit or honor in case the original drawee defaults.
✅ Correct Answer: A
A "Drawee in Case of Need" (Section 7) is a backup entity named in the bill.
The logic (Reason R) is to protect the drawer's commercial reputation; if the primary drawee dishonours the bill, it is not immediately returned as "unpaid" to the market.
Instead, it is presented to the "Case of Need." Therefore (Assertion A), the liability of this backup drawee only arises upon the default of the original drawee.
They cannot be approached first.
The reason perfectly explains the procedural hierarchy.
The logic (Reason R) is to protect the drawer's commercial reputation; if the primary drawee dishonours the bill, it is not immediately returned as "unpaid" to the market.
Instead, it is presented to the "Case of Need." Therefore (Assertion A), the liability of this backup drawee only arises upon the default of the original drawee.
They cannot be approached first.
The reason perfectly explains the procedural hierarchy.