What are Negotiable Instruments?
The meaning of “Negotiable Instruments” is the exchange or give and take of documents from one person to another. An instrument could not be negotiable unless such and in such a state that the true owner could transfer the contract or engagement contained by simply delivering the instrument. According to the definition, it is "an instrument, the property in which is acquired by anyone who takes it bona fide, and for value, notwithstanding any defect of title in the person from whom he took it."
Characteristics of the Negotiable Instruments Act, 1881:
The Negotiable Instruments Act of 1881 regulates all forms of negotiable currency, including checks, bills of exchange, and promissory notes. A "negotiable instrument" is a piece of paper that can be transferred from one person to another.
- The property contained in the instrument is assumed to belong to the person holding it.
- They can be freely moved.
- A holder in good standing receives the instrument free of all title defects of any prior holder.
- In due course, the holder has the right to bring a claim against the instrument in his own name.
- The instrument can be transferred until it matures, or in the case of checks, until it expires (on the expiry of 6 months from the date of issue).
- Unless the contrary is proven, certain equal presumptions apply to all negotiable instruments.
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