Negotiable Instruments

Negotiable Instruments

A negotiable instrument is a written order promising to pay a sum of money.

A document becomes negotiable when it contains an unconditional promise to pay money and is payable to a bearer or payable on demand.

Nature of the negotiable instrument are-

• Be in writing
• Be signed by the maker or drawer
• Be an unconditional promise or order to pay
• State a fixed amount of money
• Be freely transferable from one to another person
• Be payable on demand or at a definite time
• Be payable to order or to bearer

      Types of negotiable instrument

• Cheque  
• Bill of exchange
• Promissory note
• Certificate of Deposit (CD)
• Draft
• Hundis

Cheque -> A cheque is a bill of exchange on a specified banker and not expressed to be payable otherwise than on demand.

Bill of Exchange -> A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay another person a certain sum of money.

Promissory Statements -> A promissory note is an instrument in writing containing an unconditional undertaking signed by the maker to pay a certain sum of money only to a certain person or the bearer of the instrument.

Hundis -> Negotiable instruments written in any vernacular language according to the Indian Mercantile common law are called as Hundis.