Financial Definition of NEGOTIABLE INSTRUMENT

negotiable instrument

What It Is

A negotiable instrument is a signed document that gives the bearer of the document permission to obtain a certain amount of money.

How It Works

Checks are the most common negotiable instrument. They are essentially permission slips to take money out of someone's bank account. Promissory notes are also negotiable instruments, but really, almost any document whose possession can trigger the transfer of money from one entity to another is a negotiable instrument.

Why It Matters

A negotiable instrument allows people to transfer money among one another. Most negotiable instruments are unconditional promises to transfer money at some point in the future; accordingly, he who has the instrument essentially has the money.

Law Dictionary

negotiable instrument

noun

Legal Definition of negotiable instrument

  1. :  a transferable instrument (as a note, check, or draft) containing an unconditional promise or order to pay to a holder or to the order of a holder upon issue, possession, demand, or at a specified time was determined to be a holder in due course of a negotiable instrument — see also bearer, holder in due course


Financial Definition of NEGOTIABLE INSTRUMENT

negotiable instrument

What It Is

A negotiable instrument is a signed document that gives the bearer of the document permission to obtain a certain amount of money.

How It Works

Checks are the most common negotiable instrument. They are essentially permission slips to take money out of someone's bank account. Promissory notes are also negotiable instruments, but really, almost any document whose possession can trigger the transfer of money from one entity to another is a negotiable instrument.

Why It Matters

A negotiable instrument allows people to transfer money among one another. Most negotiable instruments are unconditional promises to transfer money at some point in the future; accordingly, he who has the instrument essentially has the money.


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