Negotiable instruments are written contracts in which their profits can be transferred from its original owner to a new owner. In other words, the Negotiable instruments are documents that promise to pay to the recipient (the person to whom it is given) or to the specified person. These instruments are transferable signed documents that promise to pay the holder of the amount when required or at any time in the future.

As mentioned above, Negotiable instruments are transferable. The final owner takes the money and can use it according to his needs. That means, once the instrument has been transferred, the holder of the item receives the full official title of that instrument.

Types of Negotiable instruments

Promissory notes

A promissory note means a written promise to its owner by an entity or an individual to pay a certain amount of money on a predetermined date. In other words, the Promissory notes indicate the amount which the person owes to you or you owe to the other person together with the interest rate and payment date.

For example, X purchases goods worth Rs.10,000 from Y. In case if X is not able to pay cash for the purchase then he would give Y a promissory note. It is X’s promise to pay Y either on a specified date or on demand of him.

Bill of exchange

Bill of exchange refers to a legal, binding document that directs a party to pay a pre-determined amount to a second (other) party. Some of the loans may mean that the money is needed on a later date, or it may mean that the payment is needed for that purpose.

An exchange bill is used for transactions relating to goods and services. It is signed by the debtor (called the payer) and given to the eligible party (called the payee or the seller), and as such, this can be used to fulfill the payment contract. However, the seller may also agree to the exchange and transfer it to another person, thus transferring the payment to another party.

It should be noted that when a Bill of exchange is issued by financial institutions, it is often referred to as a bank draft. And when issued by an individual, it is often referred to as a trade draft.

The Bill of exchange serves primarily as a guarantee note for international trade; the exporter or seller, in the transaction addresses a bill of exchange to an importer or the buyer. A third party, usually banks, is part of a number of exchange transactions that serve as guarantee for these payments. It helps to reduce the risk that is part and parcel of any transaction.

Cheques

A cheque refers to an instrument in writing that contains an unconditional order, addressed to the bank and signed by the person who deposited the money in the bank. This order requires the bank to pay a certain amount of money only by demanding from the person in charge of the check (the person in charge of the check) or any other person who must be paid in accordance with the instructions provided.

Cheques can be a great way to pay off various types of debt. Although the use of cheques has declined in recent years due to online banking.

People still use checks to pay off loans, college fees, car EMIs, etc.

Checks are also a great way to keep track of every transaction done on paper.

On the other hand, checks are relatively slow to pay and may take some time to process.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

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