The term NEGOTIATION may be defined as the transfer of a negotiable
instrument by one person to another so as to constitute the transferee the
holder of the instrument. This term is defined Section 14 of the Negotiable
instrument Act which read as,
“When A PROMISSORY NOTE, BILL OF EXCHANGE OR CHEQUE IS
TRANSFERRED TO ANY PERSON SO AS TO CONSTITUTE THAT
PERSON THE HOLDER THEREFORE, THE INSTRUMENT IS SAID TO
The analysis of this section reveals that the negotiation takes place when
the following two conditions are satisfied:
• The negotiable instrument is transferred from one person to another.
• The transfer is made in such a manner so as to make the transferee the
holder of the negotiable instrument.
OTHER NEGOTIATION STYLE
TYPES OF NEGOTIATION
There are two types of negotiation.
The term distributive means; there is a giving out; or the scattering of things.
Hence, this type of negotiation is often referred to as 'The Fixed Pie'.. A
distributive negotiation usually involves people who have never had a previous
interactive relationship, nor are they likely to do so again in the near future.
Simple everyday examples would be buying a car or a house.
Integrative negotiation, also known as principled negotiation, cooperative
bargaining or win-win negotiation is a type or style of negotiation in which the
parties cooperate to achieve a satisfactory result for both.
Integrative negotiation the parties adopt an attitude aimed at solving the
problem and seek a favorable outcome for both.
Hence the goal of integrative negotiation is to create as much value as
possible for oneself and for the other party, for example, through the stock
exchange where each party makes concessions, makes or gives up some that
values therefore little or no return for something he values greatly.
Integrative negotiation usually occurs in negotiations where there are several
things to negotiate, for example, in creating a society in which each partner
can bring different resources, but complementary to those of other partners.
PRINCIPLES OF NEGOTIATION
There are minimum two parties involved in the negotiation process. There exists
some common interest, either in the subject matter of the negotiation or in the
negotiating context that puts or keeps the parties in contact.
Though the parties have the same degree of interest, they initially start with
different opinions and objectives which hinder the outcome in general.
In the beginning, parties consider that negotiation is a better way of trying to
solve their differences.
Each party is under an impression that there is a possibility of persuading the
other party to modify their original position, as initially parties feel that they shall
maintain their opening position and persuade the other to change.
During the process, the ideal outcome proves unattainable but parties retain
their hope of an acceptable final agreement.
Each party has some influence or power – real or assumed – over the other’s
ability to act.
The process of negotiation is that of interaction between people – usually this is
direct and verbal interchange.
SKILLS REQUIRED FOR
Negotiation is a skill that anyone can learn and practice. The
necessary skills required for successful negotiations can be listed
• The ability to define a range of objectives
yet is flexible about some of them.
• The ability to explore the possibilities of
a wide range of options.
• The ability to be well prepared.
• The ability to listen to and question other parties.
• The ability to set priorities.
Due to globalization and growing business trends,
negotiation in the form of teams is becoming widely
adopted. Teams can effectively collaborate to break down
a COMPLEx negotiation. There is more knowledge and
wisdom dispersed in a team than in a single mind. Writing,
listening, and talking, are specific roles team members
must satisfy. The capacity base of a team reduces the
amount of blunder, and increases familiarity in a
ROLE OF EMOTION IN NEGOTAITION
POSITIVE ROLE IN NEGOTIATION
Positive emotions include joy, exhilaration, or relief. Yet, these positive
emotions can derail your thinking. It is possible to be "too happy" in a negotiation .
EFFECT IN NEGOTIATION
• Negotiators who are in a positive mood tend to enjoy the interaction more, show
less contentious behavior, use less aggressive tactics and more cooperative
• Its drawbacks is distorts perception of self performance, such that performance is
judged to be relatively better than it actually is.
NEGATIVE ROLE IN NEGOTIATION
Negative emotions such as anger, jealousy, fear, remorse, and guilt.
Negative emotions can cloud your thinking.
Anger and other negative emotions can be barriers to an agreement
EFFECT IN NEGOTAIATION
• Negotiations, anger disrupts the process by reducing the level of trust, clouding
parties' judgment, narrowing parties' focus of attention and changing their central
goal from reaching agreement to retaliating against the other side
• Angry negotiators pay less attention to opponent’s interests and are less accurate
in judging their interests
• It can sometimes be beneficial: legitimately expressed anger can be an effective
way to show one's commitment, sincerity, and needs
transferable,, signed document that promises to
pay the bearer sum of money at a future date or on
• According to section 13 of the Negotiable Instruments
Act, 1881, a negotiable instrument means “promissory
note, bill of exchange, or cheque, payable either to
order or to bearer”.
ExAMPLES OF NEGOTIABLE INSTRUMENT
i) Bills of exchange
ii) Promissory notes.
NON NEGOTIABLE INSTRUMENT
• Document of title (such as an air waybill) or a financial instrument (such as a
crossed check) that may not be transferred from the holder or named party to
• Nonnegotiable instrument is an instrument that is not negotiable.
• It is not payable to order or bearer.
• Any instrument which does not meet the requirements laid down to qualify an
instrument as negotiable is a non negotiable Instrument.
• Instrument. Similarly, an instrument which in its inception was negotiable but
has lost its quality of negotiability is a nonnegotiable Instrument
ExAMpLE Of NON-NEGOTIABLE INSTRUMENTS
TypES Of NEGOTIABLE
1- pROMISSORy NOTE: Section 4 of the Negotiable Instruments Act, 1881
defines a promissory note as ‘an instrument in writing (not being a bank note or a
currency note) containing an unconditional undertaking, signed by the maker, to
pay a certain sum of money only to or to the order of a certain person or to the
bearer of the instrument’.
SpECIMEN Of A pROMISSORy NOTE
On demand ,I promise to pay Ramesh, s/o Ram Lal of Meerut or order a
sum of Rs 10,000/- (Rupees Ten Thousand only), for value received.
pARTIES TO A pROMISSORy NOTE
The Maker or Drawer – the person who makes the note and promises to pay the
amount stated therein. In the above specimen, Sanjeev is the maker or drawer.
The Payee – the person to whom the amount is payable. In the above specimen it
is Ramesh. In course of transfer of a promissory note by payee and others, the
parties involved may be –
a. The Endorser – the person who endorses the note in favor of another person. In the
a bove specimen if Ramesh endorses it in favor of Ranjan and Ranjan also
endorses it in favor of Puneet, then Ramesh and Ranjan both are endorsers.
b. The Endorsee – the person in whose favor the note is negotiated by endorsement.
In the Above, it is Ranjan and then Puneet.
2= BILL Of ExCHANGE: Section 5 of the Negotiable
Instruments Act, 1881 defines a bill of exchange as ‘an instrument in writing
containing an unconditional order, signed by the maker, directing a certain person
to pay a certain sum of money only to or to the order of a certain person, or to the
bearer of the instrument.
SpECIMEN Of A BILL Of ExCHANGE
Five months after date pay Tarun or (to his) order the sum of Rupees Ten
Thousand only for value received.
There are three parties involved in a bill of exchange. They are:
i.The Drawer – The person who makes the order for making payment. In
the above specimen, Rajiv is the drawer.
ii. The Drawee – The person to whom the order to pay is made .He is
generally a debtor of the drawer. It is Sameer in this case.
iii. The Payee – The person to whom the payment is to be made. In this
case it is Tarun.The drawer can also draw a bill in his own name thereby he
himself becomes the payee. Here the words in the bill would be Pay to us or
order. In a bill where a time period is mentioned, just like the above
specimen, is called a Time Bill. But a bill may be made payable on demand
also. This is called a Demand Bill.
Cheque is a very common form of negotiable instrument. If you have a savings
bank account or current account in a bank, you can issue a cheque in your own
name or in favor of others, thereby directing the bank to pay the specified amount
to the person named in the cheque.
A cheque may be regarded as a bill of exchange; the only difference is that the
bank is always the drawee in case of a cheque.
Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on
a specified banker and not expressed to be payable otherwise than on demand.
A cheque is an order by the account holder of the bank directing his banker to pay
on demand, the specified amount, to or to the order of the person named therein or
to the bearer.
specimen of a cheque:
………… 20 ………
……………………………………………… or bearer
…………………………………………………. RS --------------------------STATE BANK OF INDIA
Jawaharlal Nehru University ,new Dehli-110067
A Hundi is a negotiable instrument by usage.
It is often in the form of a bill of exchange drawn in any local language in
accordance with the custom of the place.
Sometimes it can also be in the form of a promissory note.
A hundi is the oldest known instrument used for the purpose of transfer of money
without its actual physical movement.
The provisions of the Negotiable Instruments Act shall apply to hundis only when
there is no customary rule known to the people
Types of hundis
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