Quiz 16: Negotiability, Transferability, and Liability


If a bank instruction or any statement indicating "I.O.U." money states that "I want you to pay," will specify an in instrument as non-negotiable. An instrument will be negotiable only if it contains a precise promise to pay. This statement is not adequately precise and is a response of indebtedness.

Following are the requirement that needs to be fulfilled by an instrument to be negotiable: • The writing should be signed by the drawer or his marker. • The promises that are unconditional can only be negotiated. The payment cannot be restricted on non-occurrence or occurrence of any type of event. • It should be either payable to bearer or to order. • It should be payable at a definite time and on demand.

According to Uniform Commercial Code (UCC), promissory notes, drafts, checks, and certificates of deposit are the negotiable instruments. A negotiable instrument includes an order or promise to demand or pay an exact amount at a précised time to a specified person. An instrument needs to meet certain requirements to be a negotiable instrument. Requirements are as follows: 1. It needs to be in writing. 2. It needs to be signed by the drawer or the maker. 3. It needs to include an order to pay or an unconditional promise. 4. It needs to include a fixed amount of money. 5. The amount needs to be payable on demand or at specific time. 6. It is payable to bearer or to order, except if the instrument is a check.

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