Negotiable Instrument means a written document which is transferable by delivery. According to Section 13 of the Negotiable Instrument Act 1881, “A Negotiable Instrument means a Promissory Note, Bill of Exchange and Cheque, payable either to order or to bearer.
Key Features of Negotiable Instruments:
(i) Freely Transferable: Can be transferred from one person to another.
(ii) Unconditional Promise or Order: Contains a clear promise or order to pay.
(iii) Fixed Amount of Money: Specifies a definite sum.
(iv) Payable on Demand or at a Fixed Time: Must be payable at a specific time or whenever demanded.
(vi) Legal Protection: Governed by laws such as the Negotiable Instruments Act, 1881 in India.
There are different kinds of negotiable instruments:
(a) Negotiable Instruments by statue: Bills of Exchange, Promissory Notes and Cheques.
(b) Negotiable Instruments by customs or usages: Treasury Bills, Dividend Warrants, Share Warrants, Bearer Debentures, Hundi.
The characteristics of a Negotiable Instrument are:
(a) Witting and Signature according to the rules: A Negotiable Instrument must be in writing and signed by the parties according to the rules relating to:
(a) Promissory notes.
(b) Bills of Exchange.
(c) Cheques.
(b) Payable by Money: Negotiable Instruments are payable by the legal tender money of India.
(c) Unconditional Promise and order: If the instrument is a promissory note, it must contain an unconditional promise to pay. If the instrument is a bill or cheque, it must be an unconditional order to pay money.
(d) Freely transferable: A negotiable instrument is transferable from one person to another by delivery or by endorsement and delivery.
(e) Acquisition of Property: Any person, who possesses a negotiable instrument, becomes its owner and entitled to the sum of money, mentioned on the face of the instrument.
(f) No Need of Giving Notice: There is no need of giving a notice of transfer of a negotiable instrument to the party liable to pay the money.
