Types of Negotiable instruments

1. Types Of The Negotiable Instruments
Created By: Piyush Dobariya (16)

2. Negotiable Instruments
• What is negotiable?
• Negotiable means transferable.
• The negotiation that goes on refers to the transfer of the
instrument between two people, or from one bank to
another, or even from one country to another.
• What is an instrument?
• In the broadest sense, almost any agreed-upon medium
of exchange could be considered a negotiable
instrument.
• In day-to-day banking, a negotiable instrument usually
refers to checks, drafts, bills of exchange, and some
types of promissory notes.

3. Forms of 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.

4. 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

5. Types of negotiable instrument
Cheque
Bill of
exchange
Promissory
note

6. Cheques
Legal definition:(S 6)
“A" cheque" is a bill of exchange drawn on a specified banker
and not expressed to be payable otherwise than on demand”.
 NATURE
1. Always drawn on specified bank,
2. Always payable on demand.
3. Unconditional order
4. Certain sum of money
5. Sing
6. Banker name
7. Codes
8. Writing etc.

7. Parties of Cheque
Drawer : who makes cheque.
Drawee : Always banker.
Payee : whom the amount payable

8. Standard Features of a Cheque

9. Promissory Note
 Legal definition:(S 6)
"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, or to the order of, a certain
person, or to the bearer of the instrument.
 Illustrations :
• A signs instruments in the following terms
• (a) " I promise to pay B or order Rs. 500."
• (b) I promise to pay B Rs. 500 which shall be due to him.“
• (c) " I promise to pay B Rs. 500 seven days after my marriage with C."

10. Parties Of Promissory Note
 Maker : who makes PN.
 Payee : whom the amount payable

11. Essentials Of Valid Promissory Note
 Must be in writing
 Must be unconditional
 Must express promise to pay
 Must in term of money only
 Must pay in certain amount of money
 Must contain certain parties
 Must be signed by maker
 Other formalities like date, consideration
etc.

12. Standard Features of a PN

13. Bill of exchange
 Legal definition:(S 5)
“ A" bill of exchange" is 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.”
 Parties Of Promissory Note:-
 Drawer : who makes BE
 Drawee : Always ACCEPTOR.
 Payee : whom the amount payable

14. Essentials Of Valid Bill Of Exchange
 Must be in writing
 Must be unconditional
 Must express order to pay
 Must in term of money only
 Must pay in certain amount of money
 Must contain certain parties
 Must be signed by drawer
 Other formalities like date, consideration,
attestation etc.

15. Standard Features of a BE

16. OTHER TYPES
 Inland instrument
 Foreign instrument
 Bearer instrument
 Order instrument
 Instrument payable on demand
 Time instrument

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