NEGOTIABLE INSTRUMENTS

BY: ALI SIDDIQUI

HARSHIT RAJPUT
K. PRASHANT
B. VIVEK
WHAT IS NEGOTIABLE INSTRUMENTS ?
Negotiable Instruments are written contracts whose benefit could be
passed on from its original holder to a new holder. In other words,
negotiable instruments are documents which promise payment to the
assignee or a specified person. These instruments are transferable signed
documents which promises to pay the bearer/holder the sum of money
when demanded or at any time in the future.
Features of Negotiable Instruments
● The term “negotiable” in a negotiable instrument refers to the fact that
they are transferable to different parties. If it is transferred, the new
holder obtains the full legal title to it.
● Non-negotiable instruments, on the other hand, are set in stone and
cannot be altered in any way.
● Negotiable instruments enable its holders to either take the funds in
cash or transfer to another person. The exact amount that the payor is
promising to pay is indicated on the negotiable instrument and must
be paid on demand or at a specified date.
Types of Negotiable Instruments
● PROMISSORY NOTES: A promissory note refers to a written
promise to its holder by an entity or an individual to pay a certain
sum of money by a pre-decided date.
● BILL OF EXCHANGE: Bills of exchange refer to a legally binding,
written document which instructs a party to pay a predetermined
sum of money to the second(another) party.
● CHEQUES: A cheque refers to an instrument in writing which
contains an unconditional order, addressed to a banker and is
signed by a person who has deposited his money with the banker.
Advantages of using Negotiable Instrument
1. On the instrument, the owner of the property can already see his identity. If
stolen, it cannot be used like cash by Finder.
2. It could be exchanged for cash or other promises to third parties. The owner
can use it to seek loans or any other financial need whereby it's used as
collateral.
3. It can be used to pull cash from the market and hyperinflation or equity
markets stabilizer.
4. Current asset transfers are carried out on due date hence minimizing the
changes in asset hands and preserving asset quality.
Disadvantages of using Negotiable Instruments
1. It's not liquid, such as cash and credit. Thus You cannot purchase anything
in a matter of urgency as the instrument can be transferred under limited
guidelines.
2. In contrast to cash, where it is fixed, the worth of the instrument fluctuates.
The farther from the given deadline, the worth of the instrument is reduced,
as the purchaser anticipates a certain profit to purchase this instrument in
exchange for cash, which has a predetermined value.
3. In these securities, there is a larger probability of fraud contrasted with cash.
States and financial institutions issue cash. If somebody complies with the
laws or legal mandates, instruments can be prepared.
CONCLUSION