Definition of Negotiable Instrument
In simple words, a negotiable instrument is a written document where there is an order to give the written amount of money to the bearer or a specific person.
A negotiable instrument means a promissory note, bill of exchange, or cheque payable either to order or to the bearer.
Types of Negotiable Instrument
There are two types of a negotiable instrument.
- Negotiable Instrument by Statute: Promissory Note, Bill of Exchange, and Cheque.
- Negotiable Instrument by Mercantile usage: Bank Draft, Pay Order, CDR, SDR, Dividend Warrant, Interest Warrant, Refund Warrant.
|Cheque: a negotiable instrument|
- bill of lading
- stock and share certificates
- dividend warrants
- interest coupons and
- treasury bills
- It is easily transferable. Almost like cash is transferred from one hand to the other.
- Receivers are specified- drawer, drawee, payee, etc.
- No prior notice is required for such acquisition.
- It must be written and signed by the author.
- Its legal possession is the proprietor of the written amount of money.
- The legal holder may file suit in his own name on the transferable document.
- All the features of the contract are present in the transferable document.