Characteristics of negotiable Instrument

by • 06/01/2013 • GeneralComments (0)446

Q3. Discuss the essential characteristics of negotiable Instrument.

 

Ans: ESSENTIAL CHARACTERISTICS

The following are the essential characteristic of a Negotiable Instrument.

 

1. IN WRITING

A negotiable Instrument is always in writing. It cannot be verbal or in any ocher way. For example the cheque, bill of exchange and promissory note all are in written form.

 

2 UNCONDITIONAL

A negotiable instrument contains an unconditional promise or order. No condition can attach with it. Bill of exchange and cheque are unconditional order but promissory note is an unconditional promise.

 

5. PAYABLE

A negotiable is always payable on demand or at a determinable future time. If it is payable on demands the drawee or maker is bound to make payment whenever the instrument is presented for payment and if it is payable at some determined future data, the drawee or the maker is not bound to make payment before fixed data.

 

4. PAYMENT IN MONEY

A negotiable instrument is always payable in money and money’s only. No any other thing can he paid at maturity.

 

5. CERTAIN SUM

The amount of money written on the instrument is certain and fixed amount. It cannot be for uncertain amount like whatever is payable etc.

 

6. PAYABLE TO SPECIFIC PERSON

The amount of the instrument is payable to a specific person or to his order or to bearer. The payment of the negotiable instrument is payable to the person whose name is given in the instrument or to whom he nominates or who hold the instruction at the time of payment.

 

7. NEGOTIABILITY

The right or ownership in the instrument is freely transferable by delivery or endorsement and delivery. If it is bearer Instrument, the ownership passes to third person only by delivery. But if it is an order instrument, then the endorsement and delivery is necessary.

 

9. TITLE

The holder in due course is not affected by any defect in the title of the previous holder. The holder in due course means the bona-fide transferee who in good faith holds the negotiable instrument for the value before the maturity.

 

9. TRANSFERABILITY

A negotiable instrument can be transferred a number of times before maturity.

A can endorse it to B and B can endorse it to C and so on.

 

10. RECROVERY OF AMOUNT

The holder in due course can sue with his own name for the recovery of the amount. He needs no to give any notice to the transferor.

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