Negotiable Instrument is a written document that guarantees to pay a certain amount of money to the bearer of the document either on demand or by setting time. It is a method of transferring liability from one person to the other. They are mainly used for commercial transactions and financial dealings.
Examples of Negotiable Instruments include a cheque, a promissory note and a bill of exchange.
The characteristics of Negotiable Instrument includes recovery, owing to order or bearer, can be transferred voluntarily, no defects and considered to be presumption to the holder. Negotiable Instrument is always transferred by a single process and it can be recovered at any time. The document is drawn, accepted, endorsed and transferred for consideration.
Bill of Exchange
Bill of exchange is a written promissory document for a person to pay a certain amount of money to the required payee. It also contains unconditional order which is signed by the maker for directing a person to pay.
The essentials of the bill of exchange include amount which is payable are to be certain, the payment is done by money and the bill must be paid at required time or on demand. Bill of exchange is always paid by the creditor and it should be accepted by the drawee.
A cheque can be defined as an order to the bank to pay the stated amount in the document to the account of the drawer. It is payable on demand and it can be considered as a bill of exchange. The cheque can be crossed to end its negotiability. The acceptance of cheque is not always needed.
The cheque is always accepted into the account of the payee. A cheque bounce is a cheque which cannot be able to process due to the insufficiency of funds in the account holder. Banks will always return such cheques.
There are different types of cheques. Some of them are, order cheque, bearer cheque, marked cheque, open cheque, crossed cheque, bad cheque, Ante-dated Cheque, Post-dated Cheque, Stale Cheque, Mutilated Cheque, Digital Cheque- Cheques in Electronic form and Truncated Cheques, Banker Cheque, Golden Cheque and Travellers Cheque.
Other Negotiable Instruments include Bill in sets, Accommodation Bill, Ambiguous Instruments, Inchoate Stamped Instrument and Forged Instruments.
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