2. The term negotiable instruments means a written document
which entitles a person to a sum of money.
A negotiable instruments is transferable by delivery or by
endorsement and delivery.
The transfer entitles a person to the sum of money mentioned
therein.
“Thus the negotiable instrument is a document which is
legally recognized by custom of trade or law, transferable by
delivery or by endorsement and delivery.”

3. Characteristics Of a Negotiable Instrument
 Freely transferable: The property in a negotiable instrument passes from one
person to another by a simple process, i.e., by mere delivery if it is payable to
bearer, and by endorsement and delivery if it is payable to order.
 Holder’s title free from all defects: The holder in due course (one who
acquires the instrument in good faith and for consideration) gets it free from all
defects.
 Recovery: One can sue upon the instrument in his own name.
 Payable to order or bearer: - It must be payable either to order or bearer
 Presumption as to Holder:- Every holder of negotiable instrument is presumed
to be holder in due course.
 Presumption as to considerations:- Every negotiable instrument is presumed to
have been made, drawn, accepted, endorsed , negotiated or transferred for
consideration.

4. Types of Negotiable Instruments
 Promissory note.
 Bill of exchange.
 Cheque.

5. Promissory note.
A promissory note is an instrument in
writing containing an unconditional
undertaking signed by the maker to
pay a certain sum of money only to or
to the order of a certain person or to
the bearer of the instrument.

6.  MAKER : The person who makes the promissory note and promises to
pay is called the Maker.
 PAYEE: The person to whom the payment is to be made is called the
Payee.
 HOLDER: The holder is either the payee or someone to whom he may
have indorsed (transfer) the note is known as Holder.
 ENDORSER: The person who indorses the note to another is called the
Endorser .
 ENDORSEE: The person to whose favor the note is endorsed is called
the Endorsee

7.  It must be in writing.
 It must contain a promise or undertaking to
pay a definite sum of money.
 The promise to pay must be unconditional.
 It must be signed by the maker.
 The payee must be identified & must be
certain.
 The sum payable must be certain.
Essentials Of The Promissory Notes

8. Rs. 10,000/- Delhi,
February10,2012
Three months after date I promise to pay cyko on
order the sum of ten thousand rupees, for value
received.
To,
Cyko
222, Ashok Vihar
Delhi-110052
Stamp
Sd/-Ram

9. Bill Of Exchange
A bill of exchange is an instrument in writing containing an
unconditional order signed by the maker, directing a certain
person to pay a certain sum of money only to, or to the order
of certain person to the bearer of the instrument.

10.  DRAWER: The person who makes the bill of exchange is called
drawer.
 DRAWEE: The person who is directed to pay is called drawee.
 PAYEE: The person to whom the payment is to be made is called
payee.
 ACCEPTOR: When the drawee accepts the bill is called acceptor.

11. Characteristics of the Bill of Exchange
The amount payable must be certain.
The payment must be made in money.
The bill payable may be either on demand or after a specified
period.
The bill may be payable either to the bearer or to the order of
payee.

12. Rs. 500 Greater Noida,21 Feb.2009
Three months after the date pay to Ram or order the sum of Five Hundred
rupees , for value received.
To,
Cyko
235,Subhash marg
delhi-110006.
In case of need with Accepted
Canara Bank, Delhi Cyko Sd/-
Stamp
Krishna

13. A cheque is a bill of exchange drawn on a specified banker
and expressed to be payable otherwise than on demand.
Cheque
The maker of a bill of exchange or Cheque is called the
“Drawer"; the person thereby directed to pay is called the
"Drawee".

14.  DRAWER: The person who makes a cheque is called
Drawer.
 DRAWEE: The person who is directed to pay is called
Drawee.
 PAYEE: The person to whom the payment is to be made.

15. Essential characteristics of a Cheque
In writing
Express order to pay
Definite and unconditional order
Signed by drawer
Order to pay certain amount
Payable on demand

16. No.…….. Date………..2010
Pay…………………………………………………………or bearer the sum
of Rs…………………………………
Rs…………………
A/c No LF No Sd/-
PUNJAB NATIONAL BANK
Subzi Mandi,Delhi -110007
“5777100” 111013035”

17.  I CONCLUDE THAT THESE NEGOTIABLE
INSTRUMENTS PLACE A VERY IMPORTANT
ROLE IN PRESENT FINANCIAL SYSTEM FOR
LOT OF SAFETY FOR THE FINANCIAL
REQUIREMENTS.