What Constitutes a Negotiable Instrument: A Case Study

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What Constitutes a Negotiable Instrument: A Case Study A “Negotiable Instrument” is a commercial paper, which facilitates issue and receipt of consideration, but is not legal tender itself. A Negotiable Instrument is easily transferable from one person to another. These instruments are called ‘negotiable’ due to this easy transferability from one individual to another. Article 3.0 and 4.0 of the United Commercial Code (UCC) governs the Negotiable Instruments Act, in the United States. What is a Negotiable Instrument An instrument must satisfy the following criteria to be termed as a “negotiable instrument” 1. It has to be in writing and endorsed by the issuer. 2. It has to be unconditional. For example, say party A, issues a NI to party B for $1,800 with the understanding that party B will invest the money in stocks approved by party A in the first year and repay the money to party A in the second year at a certain date and time, on demand. This is a pre-condition between party A and party B. Therefore, there is a condition associated with it, which disqualifies it from being a negot...

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