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Negotiable Instruments



Definition

According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means "promissory note, bill of exchange, or cheque, payable either to order or to bearer".

Negotiable instrument is a written document that represents an unconditional promise to pay a specified amount of money on the demand of its owner. Examples include checks, promissory notes and bill of exchange. Negotiable instruments can be transferred from one person to another.

Types of negotiable instruments

According to the Negotiable Instruments Act, 1881 there are only three types of negotiable instruments they are;

  • Promissory note
  • Bill of exchange
  • Cheque

However many other documents are also recognized as negotiable instruments on the basis of custom and usage, such as

  • Hundis
  • Treasury bills
  • Share warrants, etc.
    But they must possess the features of negotiability.
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