Negotiable Instruments

Definition - What does Negotiable Instruments mean?

A negotiable instrument is document that can be used to transfer money from one party to another. In order for the transfer to go through, a signature is required from the party making the payment. In the context of the law, once the signature is provided, and the instrument has been handed over to the receIving party, that party has the legal rights to the instrument and the money it represents.

Justipedia explains Negotiable Instruments

Checks, promissory notes, bills of exchange, and securities are all examples of negotiable instruments. If a person has received a check, and he or she wants to give it to another party, he or she can sign the back of it, or "endorse" it. After that, he or she can give the endorsed check to another party. The new party is the legal owner of the instrument. The new owner can then redeem the check for money at a bank if he or she would like to do so.

Share this:

Connect with us

Find a Lawyer