Negotiable instruments are widely used in business for payments and credit. They allow transfer of money obligations easily from one person to another. Common instruments are promissory note, bill of exchange, and cheque. Exams also ask about endorsement, holder and holder in due course.
A negotiable instrument is a written document that creates a right to receive money and is transferable from one person to another so that the transferee can sue in his own name.
Main features:
A promissory note is a written and signed instrument containing an unconditional promise by the maker to pay a certain sum of money to a certain person or order or bearer.
Parties:
A bill of exchange is a written and signed instrument containing an unconditional order by the drawer directing the drawee to pay a certain sum of money to a certain person or order or bearer.
Parties:
A cheque is a bill of exchange drawn on a specified banker and payable on demand.
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Features (any three):
(Any three.)
Promissory note vs bill of exchange:
Business law encompasses all of the laws that dictate how to form and run a business. This includes all of the laws that govern how to start, buy, manage and close or sell any type of business. Business laws establish the rules that all businesses should follow.
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Negotiable instruments are widely used in business for payments and credit. They allow transfer of money obligations easily from one person to another. Common instruments are promissory note, bill of exchange, and cheque. Exams also ask about endorsement, holder and holder in due course.
A negotiable instrument is a written document that creates a right to receive money and is transferable from one person to another so that the transferee can sue in his own name.
Main features:
A promissory note is a written and signed instrument containing an unconditional promise by the maker to pay a certain sum of money to a certain person or order or bearer.
Parties:
A bill of exchange is a written and signed instrument containing an unconditional order by the drawer directing the drawee to pay a certain sum of money to a certain person or order or bearer.
Parties:
A cheque is a bill of exchange drawn on a specified banker and payable on demand.
Parties:
Endorsement is signing on the instrument (usually on the back) for the purpose of transferring it to another person.
Dishonour occurs when an instrument is not accepted (where required) or not paid when due.
Crossing is a direction that cheque should be paid only through a bank, increasing safety (concept level).
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Negotiable instruments are written documents used in business to make and settle payments. The main negotiable instruments are promissory note, bill of exchange and cheque.
Thus, promissory note is a promise, while bill and cheque are orders, and cheque is a special type of bill drawn on a bank.