Negotiable Instruments

Running head: Negotiable Instruments and the various types

Negotiable Instruments and the various types

Christopher Lonero Sr.

Grantham University

Abstract

In order to actually know if an instrument is considered a negotiable instrument you need to know what classifies a negotiable instrument and the various types of them. This paper will help you determine these facts.

Negotiable Instruments and the various types

What is a negotiable instrument? What constitutes an instrument to be negotiable? These questions are not as tricky to answer as you may think as long as you know the legal definition, requirements for it to be classified one and the Two different classifications.

Negotiable Instruments defined:

The law defines a negotiable instrument as “A written and signed unconditional promise or order to pay a specific sum of money on demand or at a definite time to order (to a specific person or entity) or bearer, but there are requirements that must be met. These requirements are as follows:

1) It must be in writing

2) It must be signed by the maker or the drawer

3) It must be an unconditional promise or order to pay

4) It must state a fixed amount of money

5) It must be payable on demand or at a definite time

6) It must be payable to order of or bearer, unless it is a check in this case it must be payable to either a person or cash

Classifications of Negotiable Instruments

There are two (2)classifications of negotiable instuments

Drafts and Checks (orders to pay:

These types of instruments are an unconditional written order that involves three parties. These parties are the drawer the person creating the instrument, the drawee or the person to be paid and the payee or person who has the money to be paid out such as a bank.

Promissory Notes and CDS (Promise To Pay): these instruments area written promise between two parties the maker person who wrote the note and the payee or the one owed or the promise is made to. Case in...