0

From: Small Claims Court: Procedure and Practice (4th edn., 2017), p. 48.

A negotiable instrument is an unconditional order or promise to pay an amount of money, which can be transferred—for example, cheques or banknotes (paper money).

Doesn't the unconditionality (of the order or promise) imply the end of negotiations? Thus what was negotiable, is no longer negotiable, and thus is now negotiated?

  • 2
    dictionary.com/browse/negotiable: "negotiable, adj. (of bills, securities, etc.) transferable by delivery, with or without endorsement, according to the circumstances, the title passing to the transferee." So the meaning of this sense of negotiable doesn't necessarily have to do with negotiations. If you want to know why the two words are similar, English.SE would be the place to ask. – Nate Eldredge Mar 26 '18 at 17:47
  • @NateEldredge Thanks. This meaning of transferability ostensibly existed in the Latin etymon. – Greek - Area 51 Proposal Mar 27 '18 at 18:15
1

A negotiable instrument is a document that includes an order or an undertaking to pay money if it is

a) capable of being transferred from one person to another (either by delivery or by endorsement and delivery) so the holder of the instrument may sue on it in his own name; and

b) it provides the bona fide purchaser for value the complete legal title to the instrument without any encumbrance from title defects or other equities or other prior holders of the instrument (assuming the purchaser did not receive notice of any such defect in title or equity before making the transfer).

Negotiability is the

Characteristic of a document (such as a check, draft, bill of exchange) that allows it to be legally and freely (unconditionally) assignable, saleable, or transferable. It allows the passing of its ownership from one party (transferor) to another (transferee) by endorsement or delivery. The concept of negotiability was developed in response to the need for a substitute for money that would be readily acceptable in trading. Negotiability requires that the party accepting a payment document is assured of its payment, and is protected from the actions or defects of the transferor. Therefore the fact that a document is negotiable insulates the accepting party from the primary party's (the original writer or issuer of the document) attempt to assert any legal defense against any transferee.

This ability of the document (or instrument as it is formally called) to effect a transfer free of legal defense is the very essence of negotiability. Negotiability of a document is affected by (1) the statutory formalities and language (specific terminology) used in its making, (2) proper endorsement or delivery, and (3) the transferee being (or having the rights of) a holder in due course.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.