Negotiable Instruments Essay Examples & Outline

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Negotiable Instruments

A negotiable instrument often means an unqualified promise or instruction to pay a secure amount of money, with or even without interest or other charges described in the promise of order. The negotiable instrument is often payable to the bearer in at the time when issued or when it comes to the possession of a holder. The negotiable interest is in many cases payable on demand or at a definite time. I was stunned to discover that a negotiable instrument which had no other undertaking as well as instruction by the person that was promising or ordering the payment is considered legal. If there is no waiver of the benefit of the law intended for the advantage of the obligatory the negotiable instrument is still legitimate.

From this evidence, it can be realized that an instrument that is used to serve or to take value instituting at least part of a performance contract (Floyd, 2008). Further, the rights of a holder in due course are often negotiable instrument are often qualitatively as a matter of law more superior to those which are provided by ordinary species of contracts. The U.S code states that a negotiation often enables a transferee to become a party to the contract and contract assignment which is provided by operation of law and to be able to impose the agreement when it comes to the transferee-assignee’s name. Further, according to the law, negotiations are often effected by either delivery or endorsement (order instruments) or bearer instruments.

There is confusing information regarding the different meanings depending on what law applies as well as the context the term used for. Further, another concept that got me confused was the fact that if money is promised to be paid, the instrument itself can often be used by the owner in due sequence as a store of value (Floyd, 2008). The fact that the instrument may be transferred to a third party and that it is the holder of the instrument will ultimately get paid by the payer of the instrument. Further, the fact that transfers can occur at less than the appearance worth of the instrument known as discounting may happened if there is no doubt about the payer’s ability to pay. This information is confusing; this is because the nature of the negotiable instrument as a supply of worth and most countries often pass laws specifically related to other negotiable instruments.

A businessman should understand that a negotiable instrument must always be a promise or order to pay, and it must be unconditional. Secondly, the payment must show a specific sum of money although the interest may be added to the sum. Thirdly, the payment must be made on demand at a certain time and lastly, the instrument must no require the person to promise payment in order to perform any other act other than the person paying the money specified (Floyd, 2008). The instrument should always be payable to the bearer. Therefore, the businessman should understand about the negotiation instrument and make sure that it is in writing, and it should not contain the words such as ‘to he order of’ and indicate what is payable to the individual holding the contract document.


Floyd, M. D. (2008). Understanding negotiable instruments (UCC Articles 3 and 4) and other payment systems. Durham, N.C: Carolina Academic Press.