The term negotiable instruments means a written document
which entitles a person to a sum of money.
A negotiable instruments is transferable by delivery or by
endorsement and delivery.
The transfer entitles a person to the sum of money mentioned
“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.”
Characteristics Of a Negotiable Instrument
Freely transferable: The property in a negotiable instrument passes from one
person to another by a simple process, i.e., by mere delivery if it is payable to
bearer, and by endorsement and delivery if it is payable to order.
Holder’s title free from all defects: The holder in due course (one who
acquires the instrument in good faith and for consideration) gets it free from all
Recovery: One can sue upon the instrument in his own name.
Payable to order or bearer: - It must be payable either to order or bearer
Presumption as to Holder:- Every holder of negotiable instrument is presumed
to be holder in due course.
Presumption as to considerations:- Every negotiable instrument is presumed to
have been made, drawn, accepted, endorsed , negotiated or transferred for
Types of Negotiable Instruments
Bill of exchange.
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.
MAKER : The person who makes the promissory note and promises to
pay is called the Maker.
PAYEE: The person to whom the payment is to be made is called the
HOLDER: The holder is either the payee or someone to whom he may
have indorsed (transfer) the note is known as Holder.
ENDORSER: The person who indorses the note to another is called the
ENDORSEE: The person to whose favor the note is endorsed is called
It must be in writing.
It must contain a promise or undertaking to
pay a definite sum of money.
The promise to pay must be unconditional.
It must be signed by the maker.
The payee must be identified & must be
The sum payable must be certain.
Essentials Of The Promissory Notes
Rs. 10,000/- Delhi,
Three months after date I promise to pay cyko on
order the sum of ten thousand rupees, for value
222, Ashok Vihar
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 a certain sum of money only to, or to the order
of certain person to the bearer of the instrument.
DRAWER: The person who makes the bill of exchange is called
DRAWEE: The person who is directed to pay is called drawee.
PAYEE: The person to whom the payment is to be made is called
ACCEPTOR: When the drawee accepts the bill is called acceptor.
Characteristics of the Bill of Exchange
The amount payable must be certain.
The payment must be made in money.
The bill payable may be either on demand or after a specified
The bill may be payable either to the bearer or to the order of
Rs. 500 Greater Noida,21 Feb.2009
Three months after the date pay to Ram or order the sum of Five Hundred
rupees , for value received.
In case of need with Accepted
Canara Bank, Delhi Cyko Sd/-
A cheque is a bill of exchange drawn on a specified banker
and expressed to be payable otherwise than on demand.
The maker of a bill of exchange or Cheque is called the
“Drawer"; the person thereby directed to pay is called the
DRAWER: The person who makes a cheque is called
DRAWEE: The person who is directed to pay is called
PAYEE: The person to whom the payment is to be made.
Essential characteristics of a Cheque
Express order to pay
Definite and unconditional order
Signed by drawer
Order to pay certain amount
Payable on demand
Pay…………………………………………………………or bearer the sum
A/c No LF No Sd/-
PUNJAB NATIONAL BANK
Subzi Mandi,Delhi -110007
I CONCLUDE THAT THESE NEGOTIABLE
INSTRUMENTS PLACE A VERY IMPORTANT
ROLE IN PRESENT FINANCIAL SYSTEM FOR
LOT OF SAFETY FOR THE FINANCIAL