Having now described the meaning and classification of indorsement, it is necessary to consider next the effect of this act on the various parties to a negotiable instrument. The bona-fide holder has the right to press his claim for full payment against the other parties to the instrument. These persons are not liable in the same degree, and may be divided into two classes. The first group includes the maker of a promissory note and the acceptor of a bill of exchange, who are both absolutely liable to the holder for payment and are called the primary obligors. The second group includes the drawer of a bill and the indorser of a bill or of a note, who are merely under a conditional or secondary obligation, for they will be called upon to pay only if the maker or the acceptor has refused to meet the claim of the holder.

When a holder of an instrument brings notice of the obligation to the parties primarily liable, this act is known as presentment. A demand obligation such as a check is presented in order to obtain payment, and a bill of exchange which is due at a future time is presented to the drawee for his acceptance. Pre-sentment is merely the exhibiting of the instrument, and the actual request for payment or acceptance is known as demand. The purpose of presentment and demand by the holder is to secure payment from the drawee or maker, and also to fix the liabilities of the parties secondarily obligated.

Correct procedure must be observed, otherwise the holder may forfeit claims against drawers and indorsers. Both presentment and demand must be made at the correct time and place. A demand obligation should be presented within a reasonable time after its issue. In the case of a check this may be interpreted to mean within twenty-four hours if the holder and the drawee bank are both located in the same city. But if the holder delays the presentment, and if in the meantime the bank fails, the claim against the party who first drew the instrument is terminated. Time instruments must be presented for payment on the day specified. If, however, this date happens to fall on a Sunday or legal holiday, presentment is made on the following business day. Presentment for both demand and time instruments should be made within business hours, which in the case of a bank would mean between nine o'clock in the morning and three in the afternoon.

The place of payment depends upon the wording of the instrument. If the place of payment is designated as at the X Bank, it is there that presentment must obviously be made. If no address is given, it is understood that the instrument shall be presented at the obligor's place of business or, if it cannot be found, at his residence.

If presentment is made to the obligor, and he accepts and later pays the instrument when due, negotiation is completed. If this party refuses to accept, or to pay after acceptance, the instrument is said to be dishonored, either for nonacceptance of a bill or for nonpayment of a bill or of a note which is due. When these primary obligors, whether drawee of a bill or the maker of a note, have refused to meet the demand of the holder, he first states the facts of the presentment and dishonor in a formal document known as a certificate of protest. He then turns to those parties who are secondarily liable for payment, and they may be indorsers or the drawer from whom the holder has received the instrument. It is the duty of the holder to give these persons a notice of dishonor. In this document he informs them that the instrument in question has been legally presented at the proper time and place, but as acceptance or payment has been refused by the parties who were primarily obligated, the holder now looks for payment from the parties secondarily liable. If the holder of a dishonored instrument fails to notify the drawer or the indorser, these parties are thereby discharged from their liabilities. However, the indorser may yield his right to presentment, protest, and notice of dishonor, by writing before his signature the expression "Protest waived."