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Sunday, 21 August 2011

Explain the term Negotiable Instrument and what are the essentials and characteristics of negotiable instrument

Negotiable Instruments :-
The word "Negotiable" means transferable by delivery and the word instruments means written documents. It entitles a person to a certain sum of money. In simple words we can say it is a written document which is transferable from one person to another by delivery.


According to contract act it is defined as , "A negotiable instrument means a promissory note, bill of exchange or cheque payable by order or bearer."

Example :- Cheques, Bill of Exchange and Promissory Notes are the important examples of negotiable instruments.


Characteristics Of Negotiable Instruments :-
Following are the important characteristics of negotiable instruments :

1. In Writing :-
It is the basic condition of the negotiable instrument that it is always in writing. It can not be verbal.


2. Unconditional :-
It is an unconditional instrument if any condition is attached then it can not be called negotiable instrument.


3. Transferable :-
It can easily transferable from one person to another. In these instruments right of ownership passes either by delivery or by endorsement.


4. Payable On Demand :-
The amount of the instrument is payable on demand or at any predetermination future time.


5. Payable In Money :-
The amount must be written on the instrument and it is always payable in terms of money.


6. Payable To The Bearer :-
The amount written on it is payable to the bearer or to a specified person.


7. Payment of Debt :-
It can be very easily used for the payment of debt. It is very simple and convenient method of payment.


8. Right of Recovery :-
A cheque or Note gives the right to the creditor to recover the written amount from the debtor. He can recover this amount by himself or he can transfer this right to another.


9. Better Title :-
If there is a defect in the title of the previous holder it does not affect the holder in due course. So it is abetter little than others.


10. Exception of General Law :-
In case of transfer of property the general concept of law is that "No body can transfer a better title than that of his own."

But in case of instrument this law does not apply. A negotiable instrument even got in good faith from thief is better title.


11. Specified Amount :-
It is also a characteristic of negotiable instrument that specified and definite amount is written on the instrument.

4 comments:

abittys 11 November 2013 at 07:59  

thanks. A good site. All the best

Logic InfoTech SEO 19 July 2015 at 22:12  

This blog is very useful

Thank you

mathew foster 14 June 2016 at 16:47  

OK, so we have, the person, Joe blogss and we have the Corporation, MR JOE BLOGGS would that make the third partys name as Mr Joe Bloggs?

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