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 therein.

“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 defects.

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 consideration.

Types of Negotiable Instruments

Promissory note.

Bill of exchange.

Cheque.

Promissory note.

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 Payee.

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 Endorser .

ENDORSEE: The person to whose favor the note is endorsed is called the Endorsee

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 certain.

The sum payable must be certain.

Essentials Of The Promissory Notes

Rs. 10,000/- Delhi, February10,2012

Three months after date I promise to pay cyko onorder the sum of ten thousand rupees, for value

received.To, Cyko 222, Ashok Vihar Delhi-110052

Stamp

Sd/-Ram

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 drawer.

DRAWEE: The person who is directed to pay is called drawee.

PAYEE: The person to whom the payment is to be made is called payee.

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 period.

The bill may be payable either to the bearer or to the order of payee.

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.

To, Cyko 235,Subhash marg delhi-110006.

In case of need with Accepted Canara Bank, Delhi Cyko Sd/-

Stamp

Krishna

A cheque is a bill of exchange drawn on a specified banker and expressed to be payable otherwise than on demand.

Cheque

The maker of a bill of exchange or Cheque is called the “Drawer"; the person thereby directed to pay is called the "Drawee".

DRAWER: The person who makes a cheque is called Drawer.

DRAWEE: The person who is directed to pay is called Drawee.

PAYEE: The person to whom the payment is to be made.

Essential characteristics of a Cheque

In writing

Express order to pay

Definite and unconditional order

Signed by drawer

Order to pay certain amount

Payable on demand

No.…….. Date………..2010

Pay…………………………………………………………or bearer the

sum of Rs…………………………………

Rs………………… A/c No LF No Sd/- PUNJAB NATIONAL BANK Subzi Mandi,Delhi -110007 “5777100” 111013035”

I CONCLUDE THAT THESE NEGOTIABLE INSTRUMENTS PLACE A VERY IMPORTANT ROLE IN PRESENT FINANCIAL SYSTEM FOR LOT OF SAFETY FOR THE FINANCIAL REQUIREMENTS.