Negotiable Instruments
Created By: Laura Kinchen
What is a negotiable instrument?
A written order or promise to pay a sum of money, either to a specified party or to the person who holds it.
Negotiable means transferable
Negotiable Instrument
A check, like money, is a medium of exchange.
The negotiation that goes on refers to the transfer of the instrument from one party to another
Examples of Negotiable Instruments
Checks
Drafts
Bills of exchange
Some types of promissory notes
Winning Lottery Tickets, Certificates of Deposit, Bonds, Treasury bills
Checks
Most common form of negotiable instrument
Offer:Convenience for writer and recipientRelatively high degree of safetyRecord of transaction
Drafts
Three-party instrument like a check, but there are other forms
An order signed by one party (payer/drawer) that is addressed to another party (drawee) directing the drawee to pay to someone (payee) the amount indicated on the draft
Drafts
Most drafts are used for the purchase of goods and services when the transaction goes beyond the bounds of the U.S. banking law
Bills of Exchange
Negotiable and unconditional written order, such as a check, draft or trade agreement, addressed by one party to another
Common form of internationally negotiable instruments
Promissory Notes
Written promise to pay at a fixed or determinable future time a sum of money to a specified individual
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