Test: Negotiable Instruments- 1 - B Com MCQ

The term "negotiable" in relation to negotiable instruments means that the instrument can be transferred from one person to another by endorsement and delivery. This means that the instrument can be legally passed on to another party by signing and delivering it to them. This transfer can be done in return for consideration, which is typically a payment or other valuable exchange. The transferee then becomes the new holder of the instrument and has the right to enforce its payment. For example, if a promissory note is made payable to a specific person, that person can transfer the note to another person by endorsing it and delivering it. The new holder then has the right to collect the payment specified in the note.

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.

When we say that a negotiable instrument is "unconditional," it means that the instrument does not have any conditions attached to its payment. The promise or order to pay specified in the instrument must be absolute and not subject to any additional requirements or conditions. For example, if a promissory note states that the payment is only to be made if certain conditions are met, such as the completion of a specific task, then it is not considered an unconditional negotiable instrument.

One of the characteristics of negotiable instruments is that the transferee does not need to give notice of transfer to the party liable on the instrument. This means that the transferee can enforce their rights on the instrument without informing the party who is supposed to make the payment. For example, if a promissory note is transferred from one person to another, the new holder can sue the maker of the note for payment without notifying them of the transfer.

A promissory note is a type of negotiable instrument that is a written promise to pay a certain sum of money by a pre-decided date. It is a legally binding document in which one party, known as the maker, promises to pay a certain amount of money to another party, known as the payee, on a specified date or on demand. For example, if a person borrows money from a friend and signs a document stating that they will repay the borrowed amount within a certain time period, it is considered a promissory note.

A bill of exchange is a type of negotiable instrument that is a legally binding, written document that instructs a party to pay a predetermined sum of money to another party. It is a written order from the payer to the payee, directing the payment of a specified amount on a specified date. For example, in international trade, an exporter may issue a bill of exchange to an importer, instructing them to pay a certain amount of money on a specified date. The importer can then accept the bill of exchange and use it as a means of payment.

A cheque is a type of negotiable instrument that is an instrument in writing that contains an unconditional order, addressed to a banker, to pay a certain sum of money on demand or to a specified person. It is a commonly used method of payment for various transactions. For example, if a person writes a cheque to pay their monthly rent, it is an unconditional order to their bank to pay the specified amount to their landlord on demand.

The primary function of a bill of exchange in international trade is to act as a means of payment. It is a written order from the payer to the payee, directing the payment of a specified amount on a specified date. In international trade, an exporter may issue a bill of exchange to an importer, instructing them to pay a certain amount of money on a specified date. The bill of exchange acts as a means of payment for the goods or services being traded between the parties.

The main difference between a cheque and a bank draft is that a cheque is issued by an individual, while a bank draft is issued by a financial institution. A cheque is a means of payment in which the payer instructs their bank to pay a certain sum of money to the payee. It requires the signature of the payer and is typically used for various transactions. On the other hand, a bank draft is a type of negotiable instrument that is issued by a financial institution. It is a written order from the payer's bank to another bank, instructing them to pay a certain sum of money to the payee. It does not require the signature of the payer and is often used for larger transactions or when a more secure form of payment is required.

One advantage of using cheques for payment is that they provide a record of all transactions on paper. When a cheque is written, it serves as a written proof of payment and can be used as evidence of the transaction. This is especially useful for individuals or businesses who prefer to keep a physical record of their financial transactions. For example, if a company needs to track its expenses and payments, using cheques allows them to have a paper trail of all the transactions made. This can be helpful for accounting purposes and for keeping track of financial records. Additionally, cheques can also be used as a reference for future transactions or for resolving any disputes that may arise regarding the payment.