TeachMeFinance.com - explain negotiable instrument
negotiable instrument -- a written promise or order signed by the maker to transfer a specified sum of money on demand or at a fixed future time to the person named on the instrument or to the bearer. A negotiable instrument is usually in the form of a check, draft, bill of exchange, promissory note or acceptance.
Negotiable instrument -- An instrument that may be negotiated
; specifically, in law, an instrument transferable by assignment,
indorsement or delivery.
There are but three forms of negotiable instruments in common
use, viz : Check, bill of exchange (draft) and promissory
An instrument to be negotiable must contain an unconditional
promise or order to pay a certain sum in money; must
be payable on demand or at a fixed or determinable future
time; must be payable to order or to bearer; and when the
instrument is addressed to a drawee he must be named or indicated
therein with a reasonable certainty.
An instrument which contains an order or promise to do
any act in addition to the payment of money is not negotiable.
But the negotiable character of an instrument is not affected
by a provision which authorizes the sale of collateral securities
in case of failure to pay at maturity or authorizes a confession
of judgment if not paid at maturity or waives the benefit of any
law intended for the advantage or protection of the obligor
(the one upon whom the obligation to pay rests) or gives the
holder the privilege of requiring something to be done in
lieu of payment of money.
The validity and negotiable character of an instrument are
not affected by the fact that it is not dated or does not specify
the value given or that any value has been given or does not
specify the place where drawn or where payable or bears a
seal or designates a particular kind of current money in which
payment is to be made.
The maker or drawer or the payee or drawee (the one who
is to pay) and the acceptor may be the same person and if
that person indorses the instrument and puts it in circulation it
becomes a negotiable instrument.
About the author
Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English".
Copyright © 2005 by Mark McCracken, All Rights Reserved.
TeachMeFinance.com is an informational website, and should not be used as a
substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any
investment or financial decision.
Please read our disclaimer.