An instrument which in form or terms is such that it may either be treated as a bill of exchange or as a promissory note, is an ambiguous instrument. According to section 17. ‘‘Where an instrument may be constructed either as a promissory note or bill of exchange, the holder may, at his election, treat it as either, and the instrument shall henceforth treat accordingly”.
In the following cases, the instrument is taken as ambiguous:
a) Where drawer and drawee are the same person.
b) Where drawee is a fictitious person.
c) Where drawee is a person incapable of entering into a contract.
Where an instrument is so ambiguous in form as to be capable of being treated either as a bill of exchange or promissory note, it is in the option of the holder to treat it as either. But once this position is exercised, it cannot alter later. Bills drawn by an agent on the principal, or by one branch of a bank on another, are ambiguous instruments. For example: A draws a bill on B and negotiates it. B is a fictitious person. The holder may treat the bill as a promissory note by A. He need not prove presentment or give notice of dishonour.
Two more points may be remembered here: 1) When there is a discrepancy between the amount written in figures and words, the law states that the amount stated in words shall be the amount undertaken or ordered to be paid (section 18). The instrument is not invalidated by obvious and intelligible mistakes. 2) A promissory note or bill of exchange, in which no time for payment is specified, is to be taken as payable on demand (section 19).
