Characteristics of Negotiable Instrument

Here we have discussed the Characteristics of Negotiable Instrument. Negotiable instruments are the instruments i.e documents which can be transferred money . The Rules regarding Negotiable Instruments are dealt under The Negotiable Instrument Act 1881. As per this Act Cheques, Bill of Exchange and Promissory Notes are considered as Negotiable Instruments. The Negotiable Instrument can be simply explained as

Negotiable + Instrument  Here, Negotiable states for transferable Instrument stands for Document. Hence it can be said as   Transferable + Document. It can be easily understood that the documents which easily be transferable form one person to the other person is called as Negotiable Instrument.

Characteristics of Negotiable Instrument:

Below discussed are the Characteristics of Negotiable Instruments as per The Negotiable Instruments Act 1881. These characteristics are applicable for all negotiable instruments such as Cheque, Bill of Exchange and Promissory Note. Let us discuss the characteristics in detail:

1. Property

In general the right of property of the Negotiable Instrument is with the person who possesses the instrument. The person who holds the instrument is not only given with mere possession but also with right to property.

2. Freely transferrable:-

The property in Negotiable Instrument can be freely transferrable from one person to another by mere delivery (bearer) or by endorsement & delivery (to order)

3. Title of Holder in Due Course Free From all Defects:-

A holder in due course (i.e. the person who becomes the possessor of negotiable instrument before maturity, for valuable consideration in good faith) gets the instrument free from all defects in the title.

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4. Recovery

The holder in due course can sue upon a negotiable instrument in his own name for the recovery of the amount and he need not give notice of transfor to the party liable on the instrument to pay.

5. Presumptions:-

There are certain presumption which has to be made in case of negotiable instruments if not mentioned otherwise. Presumptions has to be made in relation to

 Consideration:  transferred for some consideration

 Date:  date mentioned in the instrument is considered as date of made

 Time of acceptance: it is presumed that it is been accepted within a reasonable time before maturity

 Stamp: when an instrument is lost it is presumed that it was duly stamped.

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