Business Law

Meaning And Characteristics Of Negotiable Instrument Act 1881

Meaning of Negotiable Instrument – Negotiable’ means transferable by delivery, and ‘instrument’ is a written document which creates a right in favour of any person. Therefore, a negotiable instrument is a written document which creates a right in favour of any person and which is transferable by delivery.

Definition: A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer  -Section 13

Characteristics of Negotiable Instrument

1 It is a written document.
2 A negotiable instrument payable to bearer is transferable merely by delivery, whereas a negotiable instrument payable to order is transferable by endorsement and delivery.
3 The holder of a negotiable instrument can sue upon it in his own name.
4 The consideration is not mentioned on the negotiable instrument. It is presumed that the negotiable instrument has been drawn for a valuable consideration.
5 It works in the same manner as money and, like money, it may also be transferred from one person to another.
6 The transferor does not need to give notice to any person at the time of transferring the instrument.
7 It is the simplest and most convenient mode of assignment of a debt.
8 The title to the instrument received by a bonafide transferee is not affected by any defect in the title of the transferor.

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