Negotiable Instruments PDF
Negotiable Instruments PDF
Negotiable Instruments PDF
The concept of negotiability is one of the most important features of commercial paper, a contract for
the payment of money. A negotiable instrument is a written document, signed by the maker or drawer
that contains an unconditional promise to pay a certain sum of money on delivery or at a definite time
to the bearer. It is essentially a piece of paper that can be transferred multiple times from one person or
entity to another without the use of actual cash. A check that can be endorsed multiple times by
different parties is an example of a negotiable instrument. Each time the check is endorsed and given to
another, it represents payment to that party. Because of this feature, negotiable instruments are highly
trusted and are used daily by millions of people.
When dealing with negotiable instruments, below are eight requirements to keep in mind:
1. Must be in writing.
• The writing can be on anything that is readily transferable and that has a degree of
permanence.
4. Must be unconditional.
• Payment cannot be expressly conditional upon the occurrence of an event.
• Payment cannot be made subject to or governed by another agreement.
• Payment cannot be paid out of a particular fund (except for a government issued
instrument).