Negotiable Instrument (Document)

Negotiable Instrument (Document)

A negotiable instrument is a signed document that promises a sum of payment to a specified person or the assignee. It is such as a bill of exchange, which can be transferred from a person to another by endorsement on the back of it, conveys to the transferee a legal right to the property named therein free from the claim of any other persons whatsoever. This instrument can be transferred freely from hand to hand and has a legal life that can be transferred by more delivery or endorsement. It is a signed document that promises a sum of payment to a specified person or the assignee. The payee, who is the person receiving the payment, must be named or otherwise indicated on the instrument. It is a commercial document that satisfies certain conditions and transferable either by the application of law as by the custom of bleed concerned. One of the biggest advantages of bills of exchange is that the consideration between the debtor and the creditor is presumed.

Negotiable instruments are transferable in nature, allowing the holder to take the funds as cash or use them in a manner appropriate for the transaction or according to their preference. Common examples of negotiable instruments include checks, money orders, and promissory notes. Hence, the two main characteristics of Negotiable Instruments are financial worth and transferability. They are freely transferable commercial documents, and each type of negotiable instrument has unique functions and features.

  • The promise must be in writing.
  • The promise must be signed by the maker or payer.
  • The promise must be unconditional.
  • The amount to be paid must be definite in terms of money.
  • It must be payable on demand or at a fixed or determinable future date.
  • It must be payable to a definite person. The Payee must be certain.
  • A promissory note must bear stamp at the rate prescribed by the law of a country.

Negotiable Instruments are written contracts whose benefit could be passed on from its original holder to a new holder. Most Common Types of Negotiable Instruments are; Promissory notes, Bill of exchange, Check, Government promissory notes, Delivery orders, Customs Receipts, etc. Thus a promissory note contains a promise by the debtor to the creditor to pay a certain sum of money after a certain date. The debtor is the maker of the instrument. These instruments are transferable signed documents that promise to pay the bearer/holder the sum of money when demanded or at any time in the future.