#Negotiable instruments quiz full

On the other hand, the original issuer or maker of the instrument has the obligation to pay and honor the other terms as found in the instrument, like the date of maturity of the obligation to pay. The implications of these characteristics, are that the holder has:

That whoever possesses it for a consideration, will be paid in the amount specified on the agreed date, immediate or in the future.

That the instrument represents a title.

Not necessarily a trader in the same line of business with the one transferring it to him.

That the instrument is freely or unconditionally transferable from one person to another and.

That whoever gets hold of it can justifiably believe that what he or she has value.

Our lesson focuses on checks but there is a need to put things in context.īasically, the instrument is negotiable when:

And among the most common bills of exchange is a check.

Examples could be draft, inland and foreign bill, time draft, sight or demand draft, trade acceptance, banker’s acceptance, and check. The type of bills of exchange basically depends on the time period, objective, and territory. Examples of which are certificate of deposit, bond, and debenture.

Promissory notes could be personal, commercial, real estate, and investment type.

The common examples of negotiable instruments are as follows: Before knowing the examples, rest assured that LexClassroom will create lessons addressing all the provisions of the Negotiable Instruments Law. To complement these requirements, we must know the common examples of negotiable instruments.

Five, if addressed to a drawee, he must be named or otherwise indicated therein with reasonable certainty.

Four must be payable to order or to bearer and.

Three must be payable on demand, or at a fixed or determinable future time.

Two must contain an unconditional promise or order to pay a sum certain in money.

One, in writing and signed by the maker or drawer.

It says that for an instrument to consider negotiable, the following requirements must be present: It is now ripe to tackle Section 1 of the Negotiable Instruments Law. In totality, it is about convenience and security. Thus, the negotiable instrument speaks more than its simple appearance. One way or another, the negotiable instrument is a reflection of an agreement between a debtor and a creditor. Since commerce has become so complex, to ease up this complexity for the convenience of traders, negotiable instruments are used and

A medium of exchange in commercial transactions.

#Negotiable instruments quiz full

That instead of bringing a sack full of cash, just bring one piece of paper or document The following are the purpose and function of Negotiable Instruments: For a better understanding, keep in mind the simple meaning of an instrument which is a tool used for a specific function. If the purpose is defeated or not reached, then, the instrument is considered no longer negotiable. The requirements for an instrument to be negotiable are in line with its purpose. Before knowing what is a negotiable instrument, we must know, what is the purpose and function of a negotiable instrument. The purpose basically of the law is to facilitate commercial paper transactions. In a while, we will know these requirements.

The Negotiable Instruments Law applies to all negotiable instruments that meet the requirements under Section 1 of the law. This law became effective on June 2, 1911, which is 90 days after it was published in the Official Gazette on March 4, 1911. However, in banking practice, some of its provisions are basically ineffective or useless like check certification.

It is among the oldest subsisting laws of the country. The Negotiable Instruments Law was enacted on February 3, 1911.