Negotiable Instrument

2594 WordsApr 30, 201211 Pages
Assignment on Negotiable Instrument Course Title: Legal Environment of International Business Prepared by: Farha Fatema Date of Submission: 28/04/2011 Executive Summary Negotiable instruments are written orders or unconditional promises to pay a fixed sum of money on demand or at a certain time. Promissory notes, bills of exchange, checks, drafts, and certificates of deposit are all examples of negotiable instruments. Negotiable instruments may be transferred from one person to another, who is known as a holder in due course. Upon transfer, also called negotiation of the instrument, the holder in due course obtains full legal title to the instrument. Negotiable instruments may be…show more content…
For it to work, it is imperative that the instrument be easily transferable without danger of being uncollectible. TYPES OF NEGOTIABLE INSTRUMENTS: Negotiable instruments include two main types: an order to pay (encompasses drafts and checks) and promises to pay(promissory notes and CD’s). The instruments can also be classified as demand instruments or time instruments. Thus there are four types of negotiable instruments. Demand instrument: payable on demand. (demand= instrument states it is payable on sight or demand to a holder) [a holder is the person in possession] A good example of a demand arrangement is a checking account, sometimes called a demand deposit account. 1. DRAFTS AND CHECKS (ORDERS TO PAY) Draft (or a bill of exchange): INVOLVES 3 PARTIES: An unconditional written order to pay by which the party creating the draft (the drawer) orders another party (the drawee), typically a bank, to pay money to a third party (the payee) -- e.g., a check.
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