NEGOTIABLE INSTRUMENTS

(COMMERCIAL PAPER)
Introduction

 WHAT IS NEGOTIABLE?
- Means transferable
- Reference for transference of the instrument among to 2 or more institutions
- (from one bank to another)

 WHAT IS AN INSTRUMENT?
-In the broadest sense is a medium of exchange
-Mostly used in banking : as Checks , Drafts , Bills of exchange ,some types of
promissory notes and certificate of deposits.
Function

 As a Payment

 As a Credit
Forms of Commercial Papers
 Written by hand in order to pay the value of money

 Bearer instrument

 Order instrument
Checks
 Mostly common used

 Highly prefered method for paying debts

 Offer convenience
Bills of exchange
 Negotiable and unconditional written order

 The receiver must pay money value or in goods at

a specified time

 International trade
Drafts
 Payment may be at sight or at some defined time

 For purchase of goods and services when the

transactions go beyond the bounds
Promissory notes
 Written promise to pay at a fixed or future time the
sum of money

 Investment instrument by corporation or

governments
 Conclusion
 Very important and used by Banks

 Can be sell to the third person in case ,the lender

needs money before the time

 Encourages to fraudulent negotiations

 References
Internet Sources

1. William H. Lawrence ,2002: Understanding Negotiable Instruments and Payment Systems, [on-line], [cit.
15. 3. 2012]. Available from:
http://www.lexisnexis.com/lawschool/study/understanding/pdf/NegInsCh1.pdf

2. United Nations (UN),1998: Convention on International Bills of Exchange and International Promissory
Notes , [on-line], [cit. 15. 3. 2012]. Available from:
http://www.jus.uio.no/lm/un.bills.of.exchange.and.promissory.notes.convention.1988/doc.html

3. Olivo de L., Marfa y Ricardo Maldonado, 1996 :Estudio de la Contabilidad General. Editorial Tatum,
Valencia, [on-line], [cit. 17. 3. 2012]. Available from:
http://www.ives.edu.mx/bibliodigital/Ingenierias/contabilidad/La%20Letra%20de%20Cambio%20y%20el
%20Pagar%C3%A9.pdf