What is negotiable instrument and explain its types?
Negotiable instruments are a type of document that guarantees the payment of a particular amount of money at a set time or on-demand and the payer’s name is generally mentioned on the document and its most common types are checks, promissory notes, bills of exchange, customer receipts, delivery orders, etc.
How many types of negotiable instruments are there?
Negotiable instruments include two main types: an order to pay (encompasses drafts and checks) and promises to pay (promissory notes and CD’s). The instruments can also be classified as demand instruments or time instruments.
What is the purpose of negotiable instruments?
The purpose of a negotiable instrument is to transfer funds from one entity to the other. The term ‘negotiable’ refers to the fact that the note can be assigned to another party. Once transferred, no additional demands or stipulations are made on the bearer of the document.
What is negotiable instruments also explain Dishonour and discharge of negotiable instruments?
i. When a negotiable instrument is dishonoured either by non-acceptance or non-payment, the holder has all the rights to sue the parties liable to pay. ii. It is compulsory for the holder to give notice of dishonour to every party against whom he intends to proceed.
What are negotiable instruments explain the characteristics of negotiable instruments?
A negotiable instrument is a signed document that promises a sum of payment to a specified person or the assignee. In other words, it is a formalized type of IOU: A transferable, signed document that promises to pay the bearer a sum of money at a future date or on-demand.
What are examples of negotiable instruments?
Examples of negotiable instruments include bank checks, promissory notes, certificates of deposit, and bills of exchange.
What is negotiable instrument explain its special characteristics?
Easily Transferable: A negotiable instrument is easily and freely transferable. There are no formalities or much paperwork involved in such a transfer. The ownership of an instrument can transfer simply by delivery or by a valid endorsement. Must be in Writing: All negotiable instruments must be in writing.
How is negotiable instrument issued?
A negotiable instrument can be transferred from one person to another. Once the instrument is transferred, the holder obtains a full legal title to the instrument. For an instrument to be negotiable, it must be signed, with a mark or signature, by the maker of the instrument—the one issuing the draft.
What are the main features of negotiable instrument?
Features of Negotiable Instruments
- Easily Transferable: A negotiable instrument is easily and freely transferable.
- Must be in Writing: All negotiable instruments must be in writing.
- Time of Payment must be Certain: If the order is to pay when convenient then such an order is not a negotiable instrument.
What is negotiable instrument PPT?
A negotiable instruments is transferable by delivery or by endorsement and delivery. The transfer entitles a person to the sum of money mentioned therein. “Thus the negotiable instrument is a document which is legally recognized by custom of trade or law, transferable by delivery or by endorsement and delivery.”
What is the difference between negotiable instrument and cash?
Cash is more liquid than negotiable instruments, as cash makes the transactions instantaneous. Negotiable instruments are transferable documents that guarantee cash payments either on demand or at a future time.
What does it mean to endorse a negotiable instrument?
When holder signs the instrument with an intention to negotiate it, it is called an endorsement. A simple signature of the holder on a negotiable instrument without any additional word constitutes an endorsement. The endorsement confers the property in the instrument to the endorsee (transferee) with the right of further negotiation.
Who are the parties to negotiable instrument?
Parties to the negotiable instruments. Various common parties to the negotiable instruments 1. Maker: the person who signs the promissory notes. 2. Drawer: the maker of the Bill of Exchange or a Cheque is called Drawer. 3. Drawee: the person who is directed to pay. 4. Payee: the person who will receive the money.
Is a currency note a negotiable instrument?
Types of Negotiable Instruments Currencies. Currencies, i.e., Bank Notes and Coins, are a very common type of Negotiable Instruments which we all use in our daily life as a medium of exchange Cheques. The Cheques are the substitute of the currencies and a very safe mode of transfer of payments among the merchants. Promissory Notes. Bills of Exchanges. Bearer Bonds.