 There are 10 types of negotiable instruments: (INFOGRAPHIC & SLIDES)

a) bills of exchange

b) cheques

c) promissory notes

d) bankers’ drafts

e) bank notes

f) treasury bills

g) share warrants

h) dividend warrants

i) debentures

j) travellers’ cheque
(SLIDES)

1) Bills of Exchange

a) a form of a written promise that the person who takes the bill will be paid the
amount stated in the bill when he presents it at the proper place and time

b) drawer’ – the person who draws the bill

‘drawee’ – the person to whom the order to pay is addressed
‘payee’ – person to whom payment is to be made

2) Cheques

a) a bill of exchange drawn on a banker payable on demand – section 73 of Act

of Bills of Exchange 1949
b) the most common type of bills of exchange
c) the main similarities between a cheque and a bill of exchange include:
• a cheque is a form of a bill of exchange and thus, both instruments are
governed by the same legislation, the Bills of Exchange Act 1949
• both cheques and bills of exchange must be unconditional orders to
pay both cheques and bills of exchange must be in writing
d) the main differences between a cheque and a bill of exchange include:
• a cheque must be drawn on a banker whereas a bill of exchange can
be drawn on any person
• a cheque must be made payable on demand whereas a bill of
exchange may be made payable on demand or at a fixed or
determinable future time

3) Promissory Notes

a) an unconditional promise in writing made by one person to another signed by

the maker, engaging to pay, on demand or at a fixed or determinable future
time, a sum certain in money, to, or to the order of a specified person or
bearer – section 88(1)

b) document which contains a promise by the maker that he will pay a certain
sum of money

c) commonly used as a security for a loan with the borrower drawing a note in
favour of the lender

d) a note which is both made and payable within Malaysia is an inland note; all
other notes are foreign notes – section 88(4)
4) Bankers’ Cheques

a) usually in the form of demand drafts and cashiers’ orders

b) issued by banks to customers of good standing on request and against

payment by the customer which is usually effected by debiting the customer’s
account

c) a bankers’ draft or cashiers’ order is an order to pay a specified sum of

money, addressed by a banker to himself. It may be issued by a branch
addressed to its head office or another branch of the same bank

d) takes the form of a bill of exchange but since the drawer and the drawee are
the same person (i.e. the bank), the effect is similar to that of a promissory
note – section 5(2)

e) the customer who requires a banker’s cheque will be asked to complete an

application form stating:

• the amount of the banker’s cheque

• the name of the payee

• the place of payment

f) the application form should be signed by the customer or by those persons

who have been duly authorised to act on his behalf

5) Bank Notes

• a banker’s draft payable to the bearer

• a promissory note issued by a banker as payable to the bearer on demand –

a bank note is simply a particular form of banker’s draft

6) Treasury Bills

• promissory notes or bills issued by the government under discount and fall
due at certain intervals to raise short term loans

• usually bills with a term of ninety-two days

• used as a means of short-term lending

• the safest types of lending

• sometimes used by the Government to control the supply of money in the

country

7) Share Warrants

• where shares in a public company are fully paid up, the company may issue a
warrant stating that the bearer is entitled to the shares specified in the warrant
 • share warrants issued to bearer are considered by the courts as negotiable

8) Dividend Warrants

• documents issued by a company directing its banker or bankers to pay to a

named shareholder a specified sum of money, being the share of the
declared dividend to which he is entitled

• usually takes the form of a cheque or banker’s draft; and as such is a

negotiable instrument unless, as is often the case, it is specified to be ‘not
negotiable’

9) Debentures

• documents given as acknowledgement of indebtedness

• the most common form of debentures are those issued by a corporation

acknowledging a long term loan to the corporation

• takes the form of a promissory note

10) Travellers’ Cheques

• a special form of a banker’s draft which enables the holder to draw cash on it

• are treated as negotiable due to mercantile custom or usage and are thus
governed by the same principles which apply to negotiable instruments

• rarely used as their usage has been substituted with the widespread and
cheaper usage of credit cards and debit cards