NEGOTIABLE INSTRUMENTS Meaning and
Definition
-
Negotiable instruments refer to legally recognized documents that represent a promise to pay a specific amount of money. These instruments facilitate the transfer of funds, allowing parties to make payments and conduct business transactions. The key characteristic of negotiable instruments is their transferability.
Negotiable instruments can take various forms, such as checks, promissory notes, bills of exchange, and certificates of deposit. Checks are widely used in everyday transactions, enabling individuals to transfer money from one account to another. Promissory notes are written commitments to pay a certain amount by a specified date, often used in borrowing and lending agreements. Bills of exchange are commonly employed in international trade, serving as a written order to pay a specific sum on demand or at a future date. Certificates of deposit represent time deposits in a bank and are issued to customers who deposit funds for a fixed period, earning interest over that time.
To be considered a negotiable instrument, certain conditions must be met, including being in writing, containing an unconditional promise or order to pay, being payable to a specific person or bearer, and being transferable by delivery or endorsement. Negotiable instruments are governed by specific laws and regulations that provide legal frameworks for their use and transfer.
In summary, negotiable instruments are legally binding documents that represent a promise to pay a specific sum of money. They play a crucial role in facilitating transactions and payments while ensuring the transferability of funds between parties involved.
Etymology of NEGOTIABLE INSTRUMENTS
The word "negotiable" comes from the Latin term "negotiabilis", which derives from the verb "negotiari", meaning "to carry on business". It ultimately traces back to the Latin word "negotium", which means "business" or "commercial matter".
The term "instruments" in this context refers to written documents that can represent a legal right or obligation. It comes from the Latin word "instrumentum", meaning "tool" or "implement".
Combining these roots, the term "negotiable instruments" refers to written documents that can be freely transferred, assigned, or traded as a means of facilitating business transactions.
