Features of Negotiable Instruments

It is important to understand the Features of Negotiable Instruments to know about the Negotiable Instrument Act 1881. Here we will discuss the about the meaning of Negotiable instruments and its features.

Meaning of Negotiable Instruments

Negotiable instruments means the documents which can be transferred easily for money’s worth. Negotiable means transferable and instrument means documents. This act deals only with three types of negotiable instruments namely:

• Promissory note

• Bill of exchange

• Cheques

The Act does not deal with Currency.

Features of Negotiable Instrument:

i) The right of ownership contained in the instrument can be transferred from one person to another by:

1. Mere delivery

In case the instrument is a bearer instrument then just by handing over the instrument to the other person the ownership will also be transferred to the other person. There is no need to endorsement.

2. Endorsement and delivery :

If the instrument holds the name of the owner  then it can be transferred by means of  mentioning the name of the person in the instrument which as called as Endorsement. Hence in this case the name of the person to whom it has to be transferred must be mentioned and then it has to be delivered to the other person. Once the endorsement is done then the ownership will be transferred to the other person.

ii) The transferee (to whom the instrument is transferred) taking the instrument in the good faith and for consideration gets a good title of the transferor (who transferred) is defective).

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