Duhaime's Law Dictionary


Negotiable Instrument Definition:

A document of an amount of money, or a title, which is readily transferable to another.

Related Terms: Bill of Exchange, Commodity

In Arnold, Justice Colderidge wrote:

"Generally speaking negotiable instruments are such as may be transferred by endorsement if payable to order or delivery if payable to bearer; the holder can sue in his own name, and if he is a holder for value, he takes free from equities. To complete an endorsement there must be delivery with intention to transfer the property".

In London and County Banking, Justice Manistay adopted these words:

"What is a negotiable instrument?

"A negotiable instrument been clearly transferable by any person holding it, so as by delivery thereof to give a good title to any person honestly acquiring it.

"... (W)henever an instrument is such that the legal right to the property secured thereby passes from one man to another by the delivery thereof, it is, properly speaking, a negotiable instrument, and the title to it will vest in any person taking it bona fide, and for value, whatever may be the defects in the title of the person transferring it to him....

"... (W)here an instrument is by the custom of trade transferable, like cash, by delivery, and is also capable of being sued upon by the person holding it pro tempore, there it is entitled to the name of a negotiable instrument, and the property in passes to a bona fide transferee for value, though the transfer may not have taken place in market overt."

 

Bills of exchange, promissory notes, cheques (checks), bank drafts and money orders are classic negotiable instruments. Where they are readily transferable, bonds and debentures may also qualify as negotiable instruments.

Many jurisdictions have defined negotiable instruments for the purposes of their respective jurisdictions and in those cases, the statutory definition takes precedence over the common law.

REFERENCES:

  • Arnold v. Cheque Bank (1876), 1 C.P.D. 578
  • Crosby v. Prescott 1923 SCR 446
  • London and Country Banking v The London and River Plate Bank 1888 20 QBD 232 at page 238
  • The King v National Trust Company 1933 SCR 670
  • Jacques Cartier Bank v. R. 25 SCR 84 (1889)

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