What is a negotiable instrument?
This is a document which represents money and the title in passes to a bona fide transferee free from only defect. It is a chose in action. Negotiable instruments are transferable by reason of law or trade usage or custom.
Characteristics of Negotiable Instruments
1. Consideration is presumed to have been provided i.e. past consideration is good consideration.
2. A bona fide transferee of a negotiable instrument need not be notified before it is negotiated.
3. A holder for value can sue on it in his own name.
4. If payable to the bearer, it is negotiable by delivery.
5. If payable to the order of specified person, it is negotiable by endorsement/ endorsement and delivery.
6. The party liable on a negotiable instrument needs to be notified before it is negotiated.
Examples Include: Cheques, bills of exchange, promissory notes, share warrants, dividend warrants, bearer debentures etc.
