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.


Negotiable instrument is freely transferable


Negotiable instrument contains a property which can be freely transferred from one person to the other person. It is transferred by delivery.

Title of the holder of negotiable instrument is always free from any defects


This is only in due course. It means if originally created negotiable instrument in favor of a person was transferred to another, the one holding the instrument in due course is free from any defects. At the same time he is also free from any other defects such as fraud, etc which are unavailable to the first holder or primary holder.

Recovery of the amount


The holder in due course has the right to sue for recovery of the amount. The holder in due course can sue upon the instrument on his own name and also he need not give notice of transfer to the one who is liable to pay on the instrument.

Consideration in negotiable instrument


It is presumed that the negotiable instrument have been made for consideration. The negotiable instrument is presumed to have been accepted for consideration. The negotiable instrument is presumed to have been indorsed for consideration. The negotiable instrument is presumed to have been negotiated for consideration. It is presumed in this way because, to make it easy for the holder to get a decree from a Court easily.

Date on negotiable instrument


The negotiable instrument holds a date and it is presumed that the instrument was drawn or made on that date.

Time of acceptance of negotiable instrument


When the instrument was accepted, it is always presumed that the instrument was accepted within its date. It is also presumed that the instrument was accepted before its maturity date.

Time of transfer of negotiable instrument


When the instrument was transferred, it is always presumed that the negotiable instrument was transferred before its maturity.

Time of indorsement of negotiable instrument


When the instrument was indorsed, it is always presumed that the negotiable instrument was indorsed in order.

Negotiable instrument is duly stamped


It is always presumed that the negotiable instrument perhaps lost was duly stamped.

Holder in due course of the negotiable instrument


It is always presumed that the holder of the instrument is always a holder in due course.

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