Negotiable Instruments - Definition - Law Dictionary Home Dictionary Definition negotiable-instruments

Definition :

Negotiable instruments, those the right of action upon which is, by exception from the common rule, freely assignable from one to another, such as bills of exchange and promissory notes. Any person acquiring a negotiable instrument for value and in good faith can enforce the contract contained in it against the person liable on it, although the person from whom he has obtained it had no title. See also CHOSE.

Promissory notes were made negotiable by 3 & 4 Anne, c. 9. and 7 Anne, c. 25, and placed in all respects upon the same footing with inland bills of exchange. [s. 13(1), Negotiable Instrument Act]

The (English) Bills of Exchange Act, 1882, contains the law as to negotiation of bills of exchange, promissory notes, and cheques. S. 31 declares that these instruments are negotiated when they are transferred from one person to another in such a manner as to constitute the transferee the holder of them, and s. 32 enumerates the conditions under which an indorsement may operate as a negotia-tion, as that the indorsement must be written on the bill itself, and be signed by the indorser, and must be an indorsement of the entire bill. A cheque or bill marked 'pay cash or order' is not within the Act and is not a negotiable instrument, North and South Insurance Co. v. National Provincial Bank Ltd., (1936) 105 LJKB 163. See BILL OF EXCHANGE AND NOT NEGOTIABLE.

(1) A 'negotiable instrument' means a promissory note bill of exchange or cheque payable either to order or to bearer.

Explanation (i).--A promissory note, bill of exchange or cheque is payable to the order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words, prohibiting transfer or indicating an intention that it shall not be transferable.

Explanation (ii).--A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Explanation (iii).--Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.

(2) A negotiable instrument may be payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees. [Negotiable Instruments Act, 1881 (26 of 1881), s. 13]