Negotiation in Negotiable Instrument Act

In this article we will discuss about the Negotiation in Negotiable Instrument Act. Negotiation in Negotiable Instrument Act relates to the concept of transferring the ownership from one person to the other. In general terms we use the word negotiation at par with bargaining. When it comes to Negotiable Instrument Act the Legal meaning of the word Negotiation is different. Let us discuss the meaning and types of negotiation in Negotiable Instrument Act 1881.


When a Negotiable Instrument is transferred from one person to another in a motive to make him as a holder then it is called as negotiable. To complete the negotiation it is essential that the negotiable instrument has to be delivered. The delivery must be voluntary. Sec 46 states that the negotiation ends with delivery.

Note : When it is transferred only for safe custody then it is not a negotiation.

There are two types of negotiation

Negotiation by delivery: when the instrument passes along with ownership from one person to another it is called negotiation by delivery here the bearer of the instrument becomes the owner of the instrument (sec 47).

Negotiation by endorsement and delivery: when the transferor transfer the instrument along with the name to whom it is assigned in the face or back of the instrument it is called endorsement and delivery.

Kinds of negotiation:

There are different kinds of negotiation. An instrument can be negotiated in different ways. Some of the kinds are given below:

• Actual:-  Negotiable Instrument change hand physically

• Constructive:- Negotiable Instrument has been given to agent

• Conditional or special:- Negotiable Instrument can be delivered on condition for happening or non-happening of such event. The property in this case will not transfer even after delivery.

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