Negotiable Instruments
Created By: Laura Kinchen
What is a negotiable instrument?

A written order or promise to pay a sum
of money, either to a specified party or to
the person who holds it.

Negotiable means transferable
Negotiable Instrument

A check, like money, is a medium of
exchange.

The negotiation that goes on refers to
the transfer of the instrument from one
party to another
Examples of Negotiable Instruments

Checks

Drafts

Bills of exchange

Some types of promissory notes

Winning Lottery Tickets, Certificates of
Deposit, Bonds, Treasury bills
Checks
Most common form of negotiable
instrument
 Offer:

Convenience for writer and recipient
 Relatively high degree of safety
 Record of transaction

Drafts

Three-party instrument like a check, but
there are other forms

An order signed by one party
(payer/drawer) that is addressed to
another party (drawee) directing the
drawee to pay to someone (payee) the
amount indicated on the draft
Drafts

Most drafts are used for the purchase of
goods and services when the transaction
goes beyond the bounds of the U.S.
banking law
Bills of Exchange

Negotiable and unconditional written
order, such as a check, draft or trade
agreement, addressed by one party to
another

Common form of internationally
negotiable instruments
Promissory Notes

Written promise to pay at a fixed or
determinable future time a sum of money
to a specified individual