Literature review of negotiable instruments

A negotiable instrument is a signed document that promises a

sum of payment to a specified person or the assignee. In other
words, it is a formalized type of IOU: A transferable, signed
document that promises to pay the bearer a sum of money at a
future date or on-demand. The payee, who is the person
receiving the payment, must be named or otherwise indicated
on the instrument.

Because they are transferable and assignable, some negotiable

instruments may trade on a secondary market.

Understanding Negotiable Instruments

Negotiable instruments are transferable in nature, allowing the
holder to take the funds as cash or use them in a manner
appropriate for the transaction or according to their
preference. The fund amount listed on the document includes a
notation as to the specific amount promised and must be paid
in full either on-demand or at a specified time. A negotiable
instrument can be transferred from one person to another.
Once the instrument is transferred, the holder obtains a full
legal title to the instrument.

These documents provide no other promise on the part of the

entity issuing the negotiable instrument. Additionally, no other
instructions or conditions can be set upon the bearer to receive
the monetary amount listed on the negotiable instrument. For
an instrument to be negotiable, it must be signed, with a mark
or signature, by the maker of the instrument—the one issuing
the draft. This entity or person is known as the drawer of funds.