2. INTRODUCTION
The law relating to the negotiable instruments is contained
in the Negotiable instuments Acts , 1881 which applies and
extends to the whole of india . A negotiable instrument is a
signed document that promises a sum of payment to a
specified person or the assignee.
For ex. A signed document that promises to pay the bearer a
sum of money at a future date or on-demand.
3. NEGOTIABLE INSTUMENTS
• DEFINATION:
• The word negotiable means the transferable by delivery and the word instrument
means a written document by which a right is created in favour of some person .
• Thus the term negotiable instrument literally means a written document which
creates a right in favour of somebody and is freely transferable by delivery.
• A negotiable instrument is a piece of paper which entitiles a person to a certain sum
of money and which is tranferable form one to another peron by a delivery or by
endorsement and delivery.
4. Features of Negotiable Instrument
Some of the common features of these negotiable instruments are as
follows:
1.It is always a written document.
2.It is payable to bearer than it is transferred just by delivery. And it is payable to
the orderer than it is transferred by delivery and endorsement.
3.The person who holds the negotiable document can sue based on this
document.
4.There is no consideration mentioned in the instrument. It is presumed already
that it has been drawn for a valuable consideration.
5.It works just like money and can be transferred from one person or the other.
6.For debt, it is considered one of the simplest mode.
5. Types of Negotiable Instrument
As discussed above, there are many types of negotiable instruments in the market. They
are as given below:
Commercial bill
Thisdealsincommercialmarkets.Theyaredrawneitherbythesellerorthedraweranditisdrawnbythedrawerofthe
goodsof thebuyerinplaceof thevalueforthegoodsdelivered.
Theyarealsocalledtradebills.Whenthesebillsareacceptedbythecommercialbanks,theyarecalledcommercialbills.
7. Cheque
There are many forms of cheque available as the negotiable instruments
in the market. The cheque is also known as the bill of exchange.
It orders the bank to pay a specified amount to a person’s account from a
person who has issued the cheque. Blank cheque, order cheque, bearer
cheque, etc are the different types of the cheque.
9. Treasury bills
Treasury billsarealsoknownasT-bills. Itisashort-term instrument forborrowingforthe
government. Forthese bills, thetender isissuedinthemoney marketandvarious government
departments.
Thus,forthis, tenders areinvited weekly frombrokers andbankers. Itprovides thegovernment a
very cheapwaytoborrowthemoney inthetimes offluctuatingcashandfurtheritalsoprovides the
securityfor thetransaction.Furthermore, the RBIwhichisthe bankerforgovernmentprovides
these bills atadiscountrate.
10. Bank draft
These are also the bills of exchange. So, in this, the bank’s orders one its branch to
repay the money to a person or to his order. For this, the banks charge a nominal
fee.
11. Q. From the list given below, which of
these is not a negotiable instrument?
A. Cheque
B. Bill of exchange
C. Promissory note
D. National savings certificate
