PRINCIPLES OF BUSINESS LAW

John purchases a TV from Jill for $ 5 000. John draws a cheque on Nedbank in favour of Jill or order for the $ 5 000. Jill owes Peter $ 5 000 and negotiates the cheque to Peter. John discovers that the TV does not work and cancels the cheque. Peter takes the cheque for payment, only to discover that the cheque has been cancelled.

(a) Explain how Jill will 'negotiate' the cheque to Peter.

(b) What rights does Peter possess? Explain your answer

(c) Why is Jill not a holder in due course?

(d) How could John have stopped the cheque being transferred further than the payee?