LEGAL ASPECT OF BUSINESS

BY:-Sajal Shrivastava
Types Of Negotiable Instrument
Meet The Instruments

1.Cheque 2.Bills of Exchange 3.Promissory Note

 1.Cheque
Cheques are perhaps the most common negotiable instrument example. This is an instrument in writing
with a specific payment amount. Upon receipt, the payer’s financial institution pays out these funds to
the bearer, either in cash or to a chosen bank account. Cheques are used to pay many different types of
bills, from loans to university fees and rent. They’re being phased out in favor of online banking
transactions, but cheques still provide a helpful paper trail for businesses.
2.Bills of Exchange
Bills of exchange used in transactions related to both goods and services, bills of exchange are
legally binding documents. They instruct one party to pay a predetermined sum to a secondary
party. The payer signs the bill of exchange, creating a written contract of payment. When issued by
a financial institution, a bill of exchange is often called a bank draft. When issued by an individual,
it’s called a trade draft.
 3.Promissory Note
When a promissory note is issued, it shows the amount owed together with the date of payment and
interest rate. Like other negotiable instruments, they are written documents showing the promise of
payment between a payer and payee. The document contains all relevant information, including interest
rate, principal amount, date of issue, and payer signature. The benefit of a promissory note is that it
enables businesses to obtain financing from sources outside of official financial institutions.
Thank You