Have An Idea Of A Negotiable Instrument

Negotiable instruments have been considered to be a very vital tool if it is concerning any business or finance. They aid every party to smoothly conduct the business. They can also become a source of funding if in need of money.

What Is A Negotiable Instrument?

It is a document, basically a written order with the name of the payer mentioned on it.

Thus it guarantees payment of a certain amount of money immediately or maybe at a scheduled period that is future dated.

It promises payment without any condition.

You can use as well as interpret the document in a little different way on the basis of what country you are using it in as well as what law is getting applied along with its context.

The best instances of these instruments are banknotes such as dollar bills and pound notes along with cheques, demand drafts, bills of exchange, promissory notes as well as certificates of deposits.

As the money has been promised to be provided on demand or at some certain time, this instrument is at times used by any holder as a value store and he holds on to that.

Negotiable instruments technically call for money payment. Lading bills and receipts of warehouse calls for merchandise delivery and thus can never be considered as negotiable instruments in the legal sense. But they can be negotiated if order documents are made.

What Are The Features of Negotiable Instruments?

• Can Be Transferred Easily: It is transferrable easily as well as freely. No such formalities or paperwork are involved in the transfer. Ownership of a negotiable instrument can be simply transferred by delivery or by any valid endorsement.
• Should Be Written: Each and every instrument must be present in writing. It includes printed, typed, handwritten, engraved notes and many more.
• Certain Payment Time: If the payee makes payment according to his convenience and time of the payment is not certain, then such an order is never a negotiable instrument. The time period must be certain. It may or may not be specified date. For instance, if the payment time is linked with a particular individual’s death it can be accepted because death is one certain event.
• Specific Payee: The individual to whom the payment must be made needs to be a specific person or maybe persons. More than one person can be a payee for this instrument. Payees also include artificial persons such as trade unions, body corporates, chairman, secretary and so on.

What Are The Types Of Negotiable Instruments?

• Promissory Notes: It refers to a promise that is written to its holder. It is written by any individual or entity for paying a certain amount of money by a date that is pre-decided. It is basically an amount that an individual owes to you or vice-versa along with the rate of interest as well as the payment date. A seller is never bound to accept any promissory note. The buyer’s reputation is of more importance to the seller to decide if he should accept it or not.
• Bill Of Exchange: It refers to a binding, written legal document that instructs any party to pay off an amount of money that is pre-determined to another party. Some bills may state that the money is due on a scheduled date which is future dated or may state that it is due immediately. It is used in some transactions that pertain to goods and services. A bill of exchange is signed by one party who actually owes them money and is known as the payer and is given to one party who is entitled to get the money and is known as the payee or the seller. Thus it could be used to fulfill the contract for the payment. A seller can also endorse it and offer it to another person. Thus it will be passed to some other parties. Always remember that when it is issued by any financial institution, it is referred to as a bank draft and when issued by any individual then called a trade draft.
• Cheques: It refers to one such instrument in writing that contains one unconditional order. It is addressed to any banker and then is signed by that individual who deposited the money with that banker. In this order, the bank should be paying a specific amount of money immediately to the cheque bearer or maybe to anyone else who must be paid specifically according to the instructions provided. Cheques are a great way of making payments for varied bills. Usage of cheques may be getting reduced with the passage of the years because of online banking, but people are still seen to make use of cheques for loan payments, clearing college fees, making EMI payments of cars and many more. It is also an effective way of tracking down all transactions on the paper. But they are a slow payment method in comparison to the others and will take some time for processing.

Negotiable instruments are beneficial business channels revolving around the financial market of a country.

Their unique specifications such as liquidity, transferability, safety, etc. make these negotiable instruments very famous in conducting business not only domestically but also globally.