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What is negotiable?
Negotiable means transferable. The negotiation that goes on refers to the transfer of the instrument between two people, or from one bank to another, or even from one country to another. FEATURES : 1. Negotiability (the transferee gets a good title than transferor ) 2. Transferability ( transfer of ownership) 3. Right in rem and in personam 4. Payment of cash only
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1)A negotiable instrument by statute : Eg. Bills of exchange, cheque, promisory notes and drafts 2) Negotiable instruments by customs or usage: Eg. Share warrants, circular notes, bearer debentures, dividend warrants, share certificates, bank notes etc.,

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Maria Mills 12 River Street Pettisville, OH 43553-0177

Check Number
Date Date

56-25 412

Pay to the order of

Payee Amount

$ Amount

Pettisville Bank
Pettisville, Ohio

For simulation use only

041200257 103 7943

For Memo 000801

Identification Numbers Account Number Slide 3 South-Western Publishing

A draft is a three-party instrument similar to a check. A draft is an order signed by one party (the drawer, or drafter) that is addressed to another party (the drawee) directing the drawee to pay to someone (the payee) the amount indicated on the draft. The payment may be at sight or at some defined time.

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A bill of exchange is a negotiable and unconditional written order, such as a check, draft, or trade agreement, addressed by one party to another. The receiver of the bill must pay the specified sum or deliver specified goods on demand or at a specified time. Bills of exchange are a common form of internationally negotiable instruments.
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Rs.25,000 Chennai 600 021 Sept. 12,2000

Three months after date pay to -------------------------- or order the sum of rupees twenty five thousand only for the value received.

To X Address ---------------------------------------------------


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A promissory note is a written promise to pay at a fixed or determinable future time a sum of money to a specified individual. These two-party instruments are legally binding documents with many specified terms that vary widely. Commercial paper, a short-term (270 days or fewer) note or daft issued by a corporation or government, is a common investment instrument.
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Specimen of Promissory note

Rs.30,000 Chennai 600 021 Sept. 12,2000

Four months after date I promise to pay X or order the sum of rupees thirty thousand only for the value received.

To X Address ---------------------------------------------------



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Written Signature Unconditional promise or order Sum certain Payable on demand or at a defined time Words of negotiation

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Transfer in 2 ways By mere delivery - in case of bearer instrument By endoresment & delivery - in case of order instrument Blank endorsement (only signature without name) Full endorsement such as Pay to Ram or order (signed) By krishnan
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Conditional endorsement Eg: Pay to Raman on delivery of bill of lading (Sd.) Krishnan Restrictive endorsement Eg: Pay to Raman only (Sd.) krishnan o Sans recourse endorsement: in case of dishonour, the endorsee cannot make the endorser liable . Eg. Pay to ram sans recourse
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Liability of the Parties: The Drawer A drawer of a draft undertakes that when the draft is presented it will be accepted and paid according to its terms. The drawer also promises that if it is dishonored the drawer will compensate the holder or any endorser who is compelled to pay on it.

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Liability of the Parties: The Endorser

An endorser is generally liable to any holder for the amount of the instrument if the party that is primarily liable dishonours it. However, if the endorser does not receive prompt notice of the dishonour from the holder of the instrument, the endorser will be freed from liability.

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Liability of the Parties: The Transferor by Delivery

A transferor by delivery is anyone who negotiates the instrument in bearer form. Since no endorsement is required, a transferor by delivery is not liable on the instrument, as an endorser, if the party that is primarily liable is incapable of paying it. A transferor by delivery is liable to an immediate transferee for such loss as the transferee would sustain
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Holder in Due Course: The Conditions

The holder in due course must satisfy the following conditions:
The holder must have taken the instrument complete and regular on its face; The instrument must have been acquired before it was overdue, and without notice of any dishonour; Consideration must have been given; and The holder must have taken the instrument in good faith and without notice of any defect.

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Charge cards Credit cards Cash cards Debit cards Smart cards

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Types of crossing - General crossing

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Special crossing

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With a charge card, a consumer makes purchases but must pay the account in full at the end of the month. Charge cards, in effect, lend the amount of purchases for a month. Originally charge cards were store cards, but eventually third-party companies formed networks of participating businesses to expand the market. American Express is the most prominent national charge card.
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Credit cards allow consumers to pay all or part of their bills each month and finance the unpaid balance. Using a credit card involves two banksthe bank that issued the card and the retailers bank.

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A consumer uses a credit card. The retailer sends the credit slip to its own bank. The retailers bank pays the retailer, records the transaction, and sends credit slip to a clearing system. The clearing system routes the credit slip to the issuing bank. The issuing bank pays the retailers bank and collects from the consumer.
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Cash cards are commonly used at an automated teller machine (ATM). Consumers can get cash, make transfers and deposits, or perform other banking functions by inserting the card and entering a personal identification number (PIN).

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Debit cards transfer money from a persons designated account to the account of the retailer. A debit card allows an immediate point-of-sale (POS) transaction.

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Smart cards are credit, debit, or other types of cards with embedded microchips. The microchips store values and use the embedded logic to change values and record transactions.

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By payment By cancellation By non presentment of cheque By Operation of law: By lapse of time By insolvency By payment of altered instrument (but does not appear to have been so altered)
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