Section 37 - Maker, drawer and acceptor principals, Section 38 - Prior party a principal in respect of each subsequent party : Negotiable Instruments Act 1881

What is Maker, drawer and acceptor principals? What is the meaning of Prior party a principal in respect of each subsequent party? Maker, drawer and acceptor principals and Prior party a principal in respect of each subsequent party are defined under Section 37 and 38 of Negotiable Instruments Act 1881

Section 37 of Negotiable Instruments Act 1881: "Maker, drawer and acceptor principals"

The maker of a promissory note or cheque, the drawer of a bill of exchange until acceptance, and the acceptor are, in the absence of a contract to the contrary, respectively liable thereon as principal debtors, and the other parties thereto are liable thereon as sureties for the maker, drawer or acceptor, as the case may be.

Section 38 of Negotiable Instruments Act 1881: "Prior party a principal in respect of each subsequent party"

As between the parties so liable as sureties, each prior party is, in the absence of a contract to the contrary, also liable thereon as a principal debtor in respect of each subsequent party.

Illustration
A draws a bill payable to his own order on B, who accepts. A afterwards indorses the bill to C, C to D, and D to E. As between E and B, B is the principal debtor, and A, C and D are his sureties. As between E and A, A is the principal debtor, and C and D are his sureties. As between E and C, C is the principal debtor and D is his surety.