CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT

CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT

A negotiable instrument has the following characteristics:

1. Property: The prossessor of the negotiable instrument is
presumed to be the owner of the property contained therein. A negotiable
instrument does not merely give possession of the instrument but right
to property also. The property ina negotiable instrument can be
transferred without any formality. In the case of bearer instrument, the
property passes by mere delivery to the transferee. In the case of an
order instrument, endorsement and delivery are required for the transfer
of property.

2. Title: The transferee of a negotiable instrument is known as
‘holder in due course.’ A bona fide transferee for value is not affected by
any defect of title on the part of the transferor or of any of the previous
holders of the instrument.

3. Rights: The transferee of the negotiable instrument can sue
in his own name, in case of dishonour. A negotiable instrument can be
transferred any number of times till itis at maturity. The holder of the
instrument need not give notice of transfer to the party liable on the
instrument to pay.

4. Presumptions: Certain presumptions apply to all negotiable
instruments e.g., a presumption that consideration has been paid under
it. It is not necessary to write in a promissory note the words ‘for value
received’ or similar expressions because the payment of consideration is
presumed. The words are usually included to create additional evidence
of consideration.

5. Prompt payment: A negotiable instrument enables the
holder to expect prompt payment because a dishonour means the ruin of
the credit of all persons who are parties to the instrument.