What are the importance of negotiable instruments?

Answer 1

A Negotiable Instrument means " a written document transferable by deliver".

Answer 2

Let me use the example of promissory note where one executes a promissory note as evidence of a promise to pay another person a sum of money at a particular date.

If it says in the terms that it is a negotiable promissory note the lender can sell it to a third party who will assume the responsibility of collecting the money promised by the borrower. It is an advantage because the lender need not wait for the due date to come before he may obtain money. Of course, in order to sell a promissory note, the lender usually sell it at a price that is lower than the maturity value or the money promised. This is to provide incentive for the buyer to buy the instrument at an expected profit. To negotiate it, the lender must endorse it to the buyer or indicate that the lender is transferring his right as collector to another person who is called a "holder in due course". This new lender assumes all the rights of a lender as described in the note. If this new lender needs the money before the maturity of the note, he may sell it to another person and so on and so on.

The disadvantage is if someone finds the promissory note and forges the signature of the lender, and present fraudulent identification papers, he can show himself as if he obtained the instrument properly and has the right to sell the instrument to another and in this regard defraud the true lender.

To obtain the advantages and protect oneself from disadvantages, one has to resort to other measures to prevent fraudulent negotiation.

Answer 3

Short advantage and disadvantages of negotiable instruments

Answer 4

1. it enables creditors to obtain cash by discounting the bill.

2. it encourages expansion of trade,particularly in international trade.

Answer 5

A Negotiable Instrument means " a written document transferable by deliver".

Answer 6

first it helps you in the daily transaction like in the services you have availed

second it provides knowledge about negotiation

and lastly it tells how important things can be

Answer 7

negotiable instruments are freely transferable in terms of ownership from one holder to another