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Goods can be sold or bought for cash or on credit. When goods are sold or bought for cash, payment is received immediately. On the other hand, when goods are sold or bought on credit the payment is delayed to a future date. In such cases, the firm relies on the party to make payment on the due date. Sometimes, to avoid any delay or default by the buyer, an instrument of credit is used through which the buyer assures the seller that the payment shall be made according to the agreed conditions. In India, instruments of credit have been in use since time immemorial and are popularly known as Hundies.

There are a variety of hundies used in our country. They are:
  • Shahjog Hundi,Darshani Hundi, Muddati Hundi, Nam-jog hundi, Dhani-jog hundi, Jawabee hundi, Hokhami hundi, Firman-jog hundi, and so on.
In the present days, these instruments of credit are called bills of exchange or promissory notes. The bill of exchange contains an unconditional order to pay a certain amount on an agreed date while the promissory note contains an unconditional promise to pay a certain sum of money on a certain date. In India these instruments are governed by the Indian Negotiable Instruments Act 1881.

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