Classification of Negotiable Instruments

The negotiable instruments are used in daily business and trade and they are transferred from one person to another person in return for a consideration. There are many negotiable instruments divided under two main heads namely; negotiable instruments by the statue and negotiable instruments by usage. Also, these negotiable instruments are classified into several types. Here under let us analyze all those instruments in detail.

Difference between Bill of Exchange and Promissory Note

Bill of exchange and promissory note are negotiable instruments by statue and are mentioned in Negotiable Instrument Act of India. Both the promissory note and the bill of exchange are used in trade but they both are different in many ways. Here under are the differences between both the instruments in detail.

Elements of a Bill of Exchange

A bill of exchange is a negotiable instrument. It is made by the person who signs it. It is an unconditional order and a direction to specific person to pay a sum of money only to another specific person or to the order of or also to the bearer of the instrument. An instrument to be a bill of exchange that shall have some features to be a bill of exchange.

Elements of a Promissory Note

The promissory note is a negotiable instrument. It is an unconditional undertaking written by the maker who signs the same. The unconditional undertaking is to pay a sum of amount to any person as mentioned in the note or to the bearer of the instrument. The maker is the one who makes the instrument. He is the one who promises to pay the amount as mentioned. He signs the instrument and ratifies his unconditional undertaking. The maker of the instrument pays the amount to another person who is called the payee.

Types of Negotiable Instruments

Negotiable instruments include bill of exchange, promissory note, cheque, bank draft, pay order, hundis, railway receipt for goods, delivery order and government promissory note. All these are broadly classified into two major kinds. One is negotiable instrument by statute and the other is negotiable instrument by usage or custom. The former one is the instrument that was created legally and the latter one was through usage it has become a negotiable instrument. Here under, a detailed explanation about both the kinds and other types.

Characteristics of Negotiable Instrument

Negotiable Instrument is a document which can be freely used in a commercial transaction as well as in monetary dealings. There are two words in here negotiable and instrument. The former one means, the document is freely transferable from one person to the other person in return for a consideration. The latter word, instrument, means it is a written document through which a person gets a right or it is a right created in favor of a person. Here under are the characteristics of a negotiable instrument.

Different kinds of Companies

Company is an association of persons coming together with a common motive of doing business which is legal in nature to earn profits out of the same and share it among themselves as agreed. There are different kinds of companies that can be established to do business and earn profits. Kinds of companies we generally see are as follows;