The expression "Negotiable Instrument" means a piece of paper in writing entitling a right to the holder, a certain sum of money. It is a piece of paper which contains some value and is transferable by simple delivery or sometimes by endorsement and delivery.

Characteristics of a Negotiable Instrument

1. Freely transferable. The property is a negotiable instrument passes from the one person to another by delivery, if the instrument is payable to bearer, and endorsement and delivery if it is payable order

2. The title of holder free from all defects .a person taking in an instrument bona fide and for value, known as the holder in due course, gets the instrument free from all defects in the title of the transferor. He is not in any way affected by any defect in the title of the transferor of any prior party .he is not affected by certain defense which might be available against the previous holder, for example, fraud, provided he him self is not a party to it

3. Recovery, the holder in due course can sue upon a negotiable instrument in his own name for the recovery of the amount further he need not give notes of the instrument to pay

4. Presumption. The Certain presumption applies to all negotiable instruments unless the contrary is provided. This presumption is dealt with in secs, 118 and 119 and are as follows

(a) Consideration.  Every negotiable is presumed to have been made drawn, accepted, indorsed, negotiable or transferred for consideration. This would help a holder to get a decree from a court without any difficulty.

(b) Date. Every negotiable instrument bearing a date is presumed to have been made or drawn on such date.

(c) Time of acceptance. When a bill of exchange has been accepted, it is presumed that it was accepted within a reasonable time of its date and before its maturity

(d) Time of transfer. Every transfer of negotiable instrument is presumed to have been made before its maturity.

(e) Order of endorsements. the endorsement appearing upon a negotiable are presumed to have been made in the order in which they appear thereon

(f) Stamp. When an instrument has been lost it is presumed that it duly stamped.

(g) Holder a holder in due course.  Every holder of a negotiable instrument is presumed to be holder in due course (sec 118)

(h) Proof of protest .in a suit upon an instrument which has been dishonor, the court, on proof of the protest presumes the fact of dishonor, unless and such fact is disproved (sec 119).

              The above presumption is rebuttable by evidence .if any one challenge any of this presumption, he has to prove his allegation again, this presumption would not arise where an instrument has been obtained by any offense, fraud or unlawful consideration.

See also

Difference between Promissory Note and bill of exchange

Distinction / Difference between Negotiation and assignment


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