Which of the following is a characteristic of negotiable instruments?a)The document must be orally transferableb)The document must be signed by the transfereec)The document must contain a conditional promise or order to payd)The document must be transferable by delivery or endorsementCorrect answer is option 'D'. Can you explain this answer?

Question

Answer

One of the characteristics of negotiable instruments is that they must be transferable by delivery or endorsement. This means that the instrument can be legally passed on to another party either by physically delivering it to them or by endorsing it and delivering it. The transferee then becomes the new holder of the instrument and has the right to enforce its payment.For example, a check can be transferred by endorsing it on the back and delivering it to another person. The new holder can then present the check to the bank for payment.

Answer

One of the characteristics of negotiable instruments is that they must be transferable by delivery or endorsement. This means that the instrument can be legally passed on to another party either by physically delivering it to them or by endorsing it and delivering it. The transferee then becomes the new holder of the instrument and has the right to enforce its payment.For example, a check can be transferred by endorsing it on the back and delivering it to another person. The new holder can then present the check to the bank for payment.

Answer

One of the characteristics of negotiable instruments is that they must be transferable by delivery or endorsement. This means that the instrument can be legally passed on to another party either by physically delivering it to them or by endorsing it and delivering it. The transferee then becomes the new holder of the instrument and has the right to enforce its payment.For example, a check can be transferred by endorsing it on the back and delivering it to another person. The new holder can then present the check to the bank for payment.

Answer

Characteristics of Negotiable Instruments
Negotiable instruments are financial documents that guarantee the payment of a specified amount of money, either on demand or at a set time. Understanding their characteristics is essential for anyone involved in finance or commerce.
Key Characteristic: Transferability
- The most crucial feature of negotiable instruments is their transferability. They can be transferred from one party to another without the need for complex procedures.
Modes of Transfer
- By Delivery: The instrument can be handed over to another party, meaning that possession alone can transfer ownership.
- By Endorsement: The holder can sign the back of the instrument, allowing it to be transferred to another individual or entity. This endorsement acts as a formal acknowledgment of the transfer.
Other Characteristics
- Written Document: A negotiable instrument must be a written document, not an oral agreement.
- Unconditional Promise or Order: It must contain an unconditional promise (in the case of promissory notes) or order (in the case of checks) to pay a specific amount.
- Signature Requirement: While the instrument must be signed, it is typically the maker or drawer who signs, not the transferee.
- No Conditions Attached: The promise to pay must be absolute, without conditions.
Conclusion
In summary, option 'D' is correct because negotiable instruments must be transferable by delivery or endorsement, which is fundamental to their function in commerce. This ensures liquidity and facilitates transactions in financial markets. Understanding these characteristics helps individuals navigate the complexities of financial agreements effectively.

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