Negotiable Instrument: Definition, Types and Characteristics

Definition of Negotiable Instrument

In simple words, a negotiable instrument is a written document where there is an order to give the written amount of money to the bearer or a specific person.

A negotiable instrument means a promissory note, bill of exchange, or cheque payable either to order or to the bearer.

Types of Negotiable Instrument 

There are two types of a negotiable instrument. 

1. Negotiable Instrument by Statute: Promissory Note, Bill of Exchange, and Cheque.
2. Negotiable Instrument by Mercantile usage: Bank Draft, Pay Order, CDR, SDR, Dividend Warrant, Interest Warrant, Refund Warrant.

Cheque: a negotiable instrument

Quasy Negotiable Instruments: The Negotiable Instruments Act 1881 does not talk of any other Negotiable Instruments except bills promissory notes checks and Bank drafts but there are some instruments that are in practice, treated as negotiable for certain events only, and are so regarded by users and custom. Some of these are documents of title of goods and property while others are documents of value. Such as 

• bill of lading 
• stock and share certificates
• debentures
• dividend warrants
• interest coupons and 
• treasury bills

Characteristics of Negotiable Instruments

• It is easily transferable.  Almost like cash is transferred from one hand to the other.
• Receivers are specified- drawer, drawee, payee, etc.
• No prior notice is required for such acquisition.
• It must be written and signed by the author.
• Its legal possession is the proprietor of the written amount of money.
• The legal holder may file suit in his own name on the transferable document.
• All the features of the contract are present in the transferable document.

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