Meaning and definition of Negotiable Instrument- 


According to Black's Law Dictionary, Negotiable instrument is a written and signed unconditional promise or order to pay a specified sum of money on demand or at definite time payable to order or bearer.

       According to Section 13 of the Negotiable Instrument Act, 1881,  A “negotiable instrument” means a promissory note, bill of exchange or cheque payable either to order or to bearer. (See also...Difference between Promissory Note and Cheque )

Explanation 1:

        A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person and does not contain words prohibiting the transfer or indicating an intention that it shall not be transferable.

Explanation 2:

        A promissory note, bill of exchange or cheque is payable to bearer which is expressed to be so payable or on which the only or last endorsement is an endorsement in blank.

Explanation 3:

       Where a promissory note, bill of exchange or cheque, either originally or by endorsement, is expressed to be payable to the order of a specified person, and not to him or his order, it is nevertheless payable to him or his order at his option.

       A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.

Kinds of Negotiable Instruments- 


There are two kinds of Negotiable Instrument namely-  (a)  Negotiable instrument by status and (b) Negotiable instrument by custom for usage

1)  Negotiable instrument by status-

      According to Section 13 of the Negotiable Instrument Act 1881, there are three types of instruments for viz, Cheque, Promissory note, Bill of exchange. these instruments are called negotiable by status

2) Negotiable instrument by custom for usage


  According to Section 137 of the Transfer of Property Act, 1882 Instrument may be negotiated by custom and their negotiability will be recognized by Courts.  It includes banknote,  dividend warrant, postal order, Bank draft, Railway receipt etc.

See also - 


Characteristics of a Negotiable Instrument

Liability of parties to Negotiable Instruments

Kinds of Crossing of Cheques

Liability of parties to Negotiable Instruments




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