Introduction:
A negotiable instrument is a legal document that promises payment to a specified person or the bearer of the document. It is a written document that contains a promise to pay a certain amount of money to the holder of the instrument or to the person whose name is mentioned in the instrument. The concept of negotiable instruments has been developed to facilitate commercial transactions and make them more efficient. These instruments are commonly used in financial transactions such as loans, credit, and investments.
Negotiable instruments are governed by the Negotiable Instruments Act, 1881, in India. The Act defines a negotiable instrument as a promissory note, bill of exchange or cheque, payable either to order or to bearer. The Act lays down various rules and regulations related to the creation, transfer, and payment of negotiable instruments. The Act also provides legal recognition to these instruments and specifies the rights and liabilities of the parties involved in the transaction.
The main characteristics of negotiable instruments are:
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Transferability: Negotiable instruments are transferable by endorsement or delivery. The holder of the instrument can transfer it to another person by endorsing it or delivering it to the transferee.
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Title: The holder of the negotiable instrument acquires a good title to the instrument, and the right to receive payment of the amount mentioned in the instrument.
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Value: A negotiable instrument must have a monetary value, and it must be payable to a specified person or to the bearer of the instrument.
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Negotiability: A negotiable instrument can be bought or sold without affecting its validity or legal status.
Overall, negotiable instruments are an essential tool for conducting commercial transactions. They provide a convenient and efficient means of transferring money and are widely used in business transactions all over the world. The legal recognition and protection provided by the Negotiable Instruments Act make these instruments a reliable and trusted means of conducting financial transactions.
